Gujarat, Telangana lead among worst affected States

Collective revenue loss of ₹971 billion for 21 major States for April alone, says India Ratings and Research

India Ratings and Research (Ind-Ra) estimates a collective revenue loss of around ₹971 billion for 21 major States for the month of April 2020 alone, due to the lockdown.

More so, the States which have a significant share of own revenue in the total revenue will be the worst impacted. The States that stand out in this regard are Telangana, apart from Goa, Gujarat, Haryana, Tamil Nadu, Karnataka, Maharashtra and Kerala as 65% to 76% of their revenue comes from their own resources.

Gujarat’s own revenue accounts for 76% of its total revenue, highest in the country, followed by Telangana closely with 75.4% and Haryana with 74.7%.

Telangana, according to government sources, suffered 95% loss in its own revenue in the month of April.

States own revenue mainly comes from seven heads – state goods and services tax (SGST), state VAT (mainly petroleum products), state excise (mainly liquor), stamps and registration fee, tax on vehicle, tax and duty on electricity and own non-tax revenue.

Things may improve somewhat in May 2020 due to the easing of some restrictions – allowing the liquor sale being the most prominent one. Thus, a number of States while allowing the sale of liquor have raised the associated excise duty. Also, some States have raised VAT on petrol and diesel. Although the lockdown is going to adversely impact the revenue performance of all the States, those with a high share of own revenue in the total revenue would be the worst impacted.

Ind-Ra has analysed the revised estimate of State Budgets for FY20 of all the major states to calculate the likely revenue loss to the major States. Here, it is important to point out that despite the lockdown, nearly 40% of the economy was functional, as economic activities defined as ‘essentials’ were allowed to remain operational. This means that despite the lockdown, some amount of revenue did accrue to the Sstate government under the head of SGST (40%), State VAT (30%), tax and duty on electricity (10%) and own non-tax revenue (10%). Even after making these adjustments, States are faced with a significant revenue loss in April 2020.

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Printable version | Jun 3, 2020 10:10:26 AM | https://www.thehindu.com/news/cities/Hyderabad/gujarat-telangana-lead-among-worst-affected-states/article31586063.ece

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