Kerala's Tax Revenue Registers Increase By Almost 22%

In FY 23, Kerala’s tax revenue grows at almost 22%, which makes the state’s the third highest among all the states with growth in tax revenue. It has registered an increase Rs 63,191.75 crore to Rs 77,164.84 crore, which is an increase of almost 14,000 crore for the fiscal year ending March 31, 2023. Translating into percentages, this is an increase of 22.1% in tax revenue despite the financial crisis which the state is undergoing reported the Indian Express.

This is a growth in state’s own tax revenue for the year 2022-23, in comparison to the last year 2021-22. This increase of 21 % makes Kerala stand at the third position, second to Maharashtra with 25.6% tax revenue growth and Gujarat with 28.4%. It needs to be taken into consideration that both Maharashtra and Gujarat have a strong manufacturing base.

Adding to this, the state’s own tax revenue in the total tax revenue of all states is 85.5%, which stands after Haryana and Karnataka. Increase in the tax revenue can be traced to revenue from goods and services tax.

The stressed fiscal situation in the case of Kerala is attributed to the Centre-State fiscal policy, in the words of K J Joseph, director of Gulati Institute of Finance and Taxation (GIFT), “faulty fiscal policy of the Centre towards states in general and Kerala in particular,” is a contributory factor towards fiscal stress.

As per his view, though the GST collections of the state are in an increasing state, it is off the required amount because, the state is a huge consumption state. In the year 2022-23, the GST collections increased to Rs 34,641 crore, that is by, 19.44%. He explained that, “if we are getting Rs 1 from SGST, the IGST contribution is just Rs 1.20. It should be more than double considering that more than 90% of the commodities in a shop are from outside the state. This shows huge leakage and a lack of transparency in the way the centre gives the share of IGST to Kerala,” reported the Indian Express.

In Kerala and Rajasthan, the Centre’s grants in aid in revenue receipts showed a decline. Rajasthan showed a decline of 4.5% while in Kerala’s case it came down by 5.2 %, from 25.8% to 20.6%. In the case of the share of Central taxes, Mr. Joseph said, “in the case of Kerala, the share of central taxes declined from 11.13% to 9.38% (1.27 percentage point decline); in other states also, the share declined except in Orissa (increased 3.67 percentage point) and Andhra Pradesh (0.70 percentage point),” the paper was co-authored along with Anitha Kumari L, associate professor of GIFT, and Raj Krishna, research assistant, GIFT.

The better part is that, in the revenue mobilisation area, a high growth in revenue mobilisation can be seen in land revenue which has been attributed to the rate hikes. The land transaction revenue increased from Rs 470.81 crore to Rs 720.10 crore, by 52.95%. The excise duties of the state also increased, from Rs 2,032.23 crore to Rs 2,875.95 crore by 41.52% in the year 2022-23.

Another factor which demands attention is the State’s borrowing, which was seen in decline. The sharp decline stood at -47%. Odisha registered the highest decline in borrowings of -168.1%. On this, Mr. Joseph said, “this is on account of the severe restrictions on borrowing in Kerala in the name of off-budget borrowing.”

For the section revenue expenditure, Kerala was the only state to register a declining revenue expenditure. In revenue expenditure Andhra Pradesh registered with 26.1%, Punjab with 17%, Maharashtra with 16.1%, and Odisha with 16.1%. Kerala in the same registered a -2.63%. As for the all-India average for revenue expenditure growth, the value was 11.5%.