KOCHI: Despite Kerala facing a financial crisis, the state has demonstrated robust growth in tax revenues for the fiscal year 2022–23.
According to the latest data, Kerala’s own tax revenue exhibited a remarkable growth rate of 22.11% in 2022–23 compared to 2021–22. This growth rate in the state’s own tax revenue ranks as the third-highest among all states. Only two states, Maharashtra (25.6%) and Gujarat (28.4%), which have a strong manufacturing base, outperformed Kerala in this regard. Kerala’s own tax revenue surged from Rs 63,191.75 crore to Rs 77,164.84 crore, marking an increase of nearly Rs 14,000 crore, or 22.1%, for the fiscal year ending on March 31, 2023.
Furthermore, the share of own tax revenue in the total tax revenue is the third-highest in Kerala, standing at 85.5%, trailing behind only Haryana and Karnataka. The significant increase in own tax revenue in Kerala can be attributed primarily to the Goods and Services Tax (GST).
K J Joseph, director of Gulati Institute of Finance and Taxation (GIFT), said the state’s stressful fiscal situation continues primarily due to the “faulty fiscal policy of the Centre towards states in general and Kerala in particular”.
According to him, the GST collections are also steadily improving, but they’re way off the required levels considering that Kerala is a big consumption state. The GST collections grew by 19.44% to Rs 34,641 crore in 2022–23. “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,” Joseph told TNIE.
The share of grants in aid from the Centre in revenue receipts recorded the highest decline in Kerala from 25.8% to 20.6%, a decline of 5.2 percentage points. Even in Rajasthan, which recorded the lowest growth in grants for aid, the share declined only by 4.5%. “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),” said Joseph in a paper he co-authored along with Anitha Kumari L, associate professor of GIFT, and Raj Krishna, research assistant, GIFT.
As far as revenue mobilisation is concerned, the highest growth was seen in land revenue, thanks to the hike in rates. The revenue from land transactions increased by 52.95% from Rs 470.81 crore to Rs 720.10 crore. The state excise duties grew 41.52% to Rs 2,875.95 crore in 2022–23 from Rs 2,032.23 crore.
Another interesting feature of Kerala’s finances was its sharp decline in borrowing last year. The highest decline in borrowing was recorded in Orissa (-168.1%). Kerala also showed a big decline (-47%) in borrowing. “This is on account of the severe restrictions on borrowing in Kerala in the name of off-budget borrowing,” said Joseph.
Kerala was also the only state to report a decline in revenue expenditure. The highest revenue expenditure growth is observed in Andhra Pradesh (26.1%), Punjab (17%), Maharashtra (16.1%), and Odisha (16.1%). In contrast, Kerala reported a -2.63% decline in its revenue expenditure. The all-India average for revenue expenditure growth was 11.5%.