GST: State revenues to rise by Rs 40,000 cr, says Standard Chartered

The total revenue gain at the aggregate level translates to around 0.2 to 0.3% of GDP

The roll-out of the goods and service tax (GST) is likely to lead to a fiscal bonanza for states, with the additional revenue at the aggregate level likely to be around Rs 35,000-40,000 crore, says a report by Standard Chartered. But, some states, such as Gujarat, Tamil Nadu and Haryana, are expected to see a loss of revenue. 

Six states, namely Uttar Pradesh, Bihar, West Bengal, Rajasthan, Madhya Pradesh and Punjab, are likely to be the main beneficiaries of the shift to the new indirect tax regime. 

According to the report, Uttar Pradesh is likely to get a boost of 1 per cent of gross state domestic product (GSDP) in the revenue, while Bihar is expected to see a rise of roughly 2.7 per cent of GSDP. This additional revenue could help states contain their fiscal deficit, which is likely to see slippages on account of additional interest payments for UDAY, the Seventh Pay Commission and the possibility of farm loan waivers.  

The total revenue gain at the aggregate level translates to around 0.2 to 0.3 per cent of GDP.

Standard Chartered estimates that the total GST pool was around Rs 8 lakh crore in FY16, rising up to Rs 9.6 lakh crore in FY17 (revised estimates). The Centre contributed 48 per cent of the total pool, with the balance accruing from the states. 

Manufacturing states such as Gujarat, Tamil Nadu and Haryana, which are expected to see a loss of revenue will be compensated by the Centre for five years after the implementation of GST.  

“The central government will receive a marginally higher share of taxes of Rs 15,000-20,000 crore in the first year,” the report said.