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State finances in a mess! 70-80% drop in tax collection in April amid lockdown

Dipak Mondal     June 9, 2020

States have witnessed 70-80% drop in tax collections in April 2020 owing to nationwide lockdown imposed to curb the spread of coronavirus. Monthly accounts reported by a few state governments give a glimpse of the mess the state finances are in owing to the lockdown.

Kerala, for example, has collected on Rs 1,270 crore in tax revenue in April 2020 compared to Rs 4,638 crore last year, a drop of over 72%. Kerala's state GST collection in April this year dropped 78% to Rs 517 crore against Rs 2,407 crore a year ago. Tax collected from sale of alcohol in the state was a meager Rs 38 crore compared to Rs 193 crore in the previous year. Taxes on sale of petroleum products also came down by 85% to Rs 104 crore in April 2020.

On the other hand, the state's total expenditure in April this year has gone up by 80% to Rs 15,636 crore against Rs 8,732 crore last year. Its fiscal deficit at the end of April was Rs 12,400 crore, 40% of its budget target of Rs 31,000 crore. Odisha, another state which has reported its April 2020 numbers, also saw its State GST collection fall by 64% in April this year to Rs 376 crore against Rs 1,041 crore in 2019. It collected a meager Rs 12.5 crore from sale of liquor April this year compared to Rs 350 crore, a drop of almost 96%.

Though on an overall tax revenue basis, the loss to Odisha has not been that severe. Its total tax revenue in April 2020 was Rs 2,915 crore against Rs 4,290 crore during the same month last year. This could be primarily because Odisha's own tax revenue accounts for less than half of its total tax revenue. Kerala's own tax revenues, on the other hand, account for almost 70% of its tax revenues.

The tax revenues of states comprise of states' own tax revenue and share from the Central taxes. Jharkhand, which has also filed its April accounts, witnessed 86% drop in SGST collections during the month. The state collected Rs 124 crore in SGST in April this year compared to Rs 881 crore collected last year. Tax collection from sale of liquor dropped from Rs 225 crore in April last year to Rs 104 crore this year. Tax from sale of petroleum products this year was Rs 265 crore against Rs 347 crore last year.

Though most other states have not yet filed their April 2020 accounts, but statements made by some of the state leaders give enough hints of the financial challenges they are facing. Like on 11 May in a video conference with the Prime Minister, Punjab Chief Minister Capt Amarinder Singh, while apprising the union government of the state's finances in the midst of the lockdown, said that the state used to collect on an average Rs 3,360 crore every month, but this has come down to 12% of that as the state collected Rs 400 crore (in April).

Similarly, Chhattisgarh commercial tax and health minister TS Singhdeo had told Business Today that compared to Rs 1,200 monthly GST collection, the state could collect only Rs 200 crore in April.

Also read: 'Remove conditions for higher state borrowings': Chhattisgarh CM tells FM Sitharaman

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