India’s top 18 states likely to hit Rs 38 trillion in revenues: CRISIL

India’s top 18 states, which account for over 90 per cent of the nation’s Gross State Domestic Product, are likely to hit Rs 38 trillion in revenues, at a growth rate of 8 to 10 per cent, according to Credit Rating Information Services of India Limited, or CRISIL.

A robust collection of Goods and Services Tax (GST) would be one of the biggest factors driving the growth, CRISIL said. The first quarter of the fiscal year 2024-’25, or FY25, which ranged from April to June, saw GST collection worth Rs 5.57 trillion, compared to Rs 5.06 trillion in the previous year. Aggregate state GST collections are expected to rise by 13 to 14 per cent in FY25 according to CRISIL, a report in Mint said.

Tax devolution from the Centre is another factor that would continue driving the growth in revenues for the states. CRISIL predicts that the devolution should increase around 12 to 13 per cent in FY25. The Finance Commission would finalise the quantum of taxes devolved while the overall volume would be in accordance with the gross tax collection of the Centre.

CRISIL predicts that the increase in government grants should be in sync with the Union Budget, at a rate of around 5 per cent. This would comprise grants from the Finance Commission as well as sops from central schemes. Overall, an upbeat rate of tax buoyancy and grants from the Union government should boost the revenues of the states, although the impact of geopolitical unrest and uncertainties of global economy cannot be ignored.

Collection of sales tax from petroleum products would continue being driven by escalating consumption of fuel, and should grow at a rate of 7 to 8 per cent, CRISIL predicts. Tax from liquor sales, comprising around 10 per cent of total revenues, should remain steady.