NEW DELHI: The sharp increase in the prices of crude oil over the last few months and increasing collections of the goods and services tax (GST) might gain states around Rs 37,426 crore during the current fiscal year, said a report from SBI Research on Friday. This gain could be enough to offset the decline in taxation if states imposed value-added taxes (VAT) only on the base price of crude.
According to the report’s authors, tax revenue impact due to the rollout of the GST regime has been minimal in many states. The report went on to state that 16 states have seen revenues grow above the 14 per cent baseline agreed to by the states and the Centre before the GST rollout. If the revenues had fallen below the baseline, the Centre would have to compensate that particular state for the amount.
“We have found that on an aggregate level, the states have gained by Rs 18,698 crore in additional revenue in FY18. If we combine this figure with the gains that the states have made due to increase in crude prices, the overall figure will be Rs 37,426 crore,” the report noted.
This amount could be used to neutralise the Rs 34,627 crore of revenue foregone if the states impose VAT only on base price of crude. “... states could come forward and rationalise their VAT rates. After all, crude price falling much below $70 a barrel looks uncertain now,” the report said.
While Gujarat, Haryana, Maharashtra, Chhattisgarh, Jharkhand and Punjab have seen substantial gains after the rollout of GST, Karnataka, Bengal, UP, MP and Assam have reported a decline in tax collection.
According to the report, GST has subsumed indirect taxes such as service tax, VAT, excise duty, entry tax, entertainment tax into one, including taxes under the Centre and the states, which contribute to an aggregate of over 55 per cent of tax revenue of these states.
The report also pointed out that while this might result in a need to “optimise tax revenue, for funding social security programmes, there is also a need to insulate consumers from adverse price shocks”.