GST casts shadow on state Budgets
With the goods and services tax (GST) set to be rolled out from July 1, states have not made many changes in the indirect tax structure in their Budgets for 2017-18, assuming that adequate compensation would be provided to them for any shortfall in revenue receipts on this count, a recent study suggests.
The Union Cabinet on Monday gave its nod to four of the five Bills approved by the GST Council. The Central GST, Union Territory GST, Integrated GST and Compensation Bills will now be tabled as money Bills in Parliament this week, which will do away with the need to get the nod of the Rajya Sabha where the ruling National Democratic Alliance does not have a majority.
The Council has approved four rates — five per cent, 12 per cent, 18 per cent and 28 per cent. Over the peak rate of 28 per cent, a cess will be imposed on sin and luxury goods, as well as on coal. Money collected from the cess would go to states as compensation. The Centre has agreed to give full compensation to states for the first five years of the GST roll-out. State Budgets this time have been presented in a different manner, in line with the Union Budget, with the concept of Plan and non-Plan expenditure being dispensed with, according to a study on Budgets for 15 states by CARE Ratings. The study has not included states that went to polls recently, as also Maharashtra, Tamil Nadu and Delhi, among others.
While states have their own priorities for spending money from different buckets, allocations made for interest payments and pensions will continue to put pressure progressively on the state finances, which will prompt them to focus more on generating additional revenue to adhere to the fiscal targets.
The largest size of the Budget for FY18 for the set of 15 states is for Karnataka at ~1.86 lakh crore followed by West Bengal and Rajasthan (about ~1.8 lakh crore). Madhya Pradesh and Gujarat are the other states with large outlays. These states put together had an outlay of ~19.65 lakh crore for FY18. The states with the lowest outlays were Himachal Pradesh, Jharkhand, Chhattisgarh, Haryana and Jammu & Kashmir (J&K).
Five leading states that had greater dependence on revenue receipts were Bihar, Jharkhand, Odisha, Chhattisgarh and Andhra Pradesh, while those with capital receipts dominating the overall revenue mobilisation efforts were J&K, Rajasthan, Telangana, Haryana and Kerala, the study says.
Aggregate fiscal deficit of these states was ~2.95 lakh crore.