More than a 3rd of state taxes to stay out of GST

The Economic Times By Sidhartha May 15, 2017, 07.04 AM IST

NEW DELHI: While states and the Centre celebrate the shift to goods and services tax (GST), they have managed to keep at least one-third of the revenue outside the new regime and in the process denied consumers the benefit of a lower levy.

Alcohol, real estate and petroleum, oil & lubricants accounted for 37% of the own tax revenue of these provinces.

A study based on the projected tax collection in 17 states by Motilal OswalBSE 3.56 % Securities in 2017-18 showed that alcohol, real estate and petroleum, oil & lubricants accounted for 37% of the own tax revenue of these provinces. Although there is an annual review in case of the oil sector, no such mechanism exists for alcohol and real estate. State finance ministers have been keen to retain their control over these three sectors, as they are cash cows, where tweaks can help meet their revenue targets.

Alcohol and real estate are also seen as sectors where there is significant generation of black money and illegal trades.

By introducing GST, the Centre and states are hoping to make the economy more transparent and plug leakages, besides ensuring that consumers benefit as tax on taxes or the cascading effect of various indirect taxes at every stage goes away. Clearly, a third of the states' economy would be bereft of the benefit.

The analysis by Motilal Oswal lead economist Nikhil Gupta, accessed by TOI, covered 17 major states that accounted for around 85% of the national GDP, almost 90% of gross market borrowings by all states. The thrust of the study, however, on the excise revenues from alcohol, was that the share of own tax revenue of states is projected to stay around 4.2% of total receipts during the current financial year compared with the recent peak of 6.3% in 2012-13. The 17 states have budgeted to collect Rs 83,300 crore from alcohol during the current fiscal, a rise of around 14% as against the near 10% growth seen during the past three years.Within states, those such as Karnataka depend excessively on alcohol to generate revenue.

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