Even as state revenue receipts have returned to the pre-pandemic level, Goods and Services Tax (GST) collections of states as a percentage of Gross State Domestic Product (GSDP) remain below pre-GST levels, as per a recent report ‘State of State Finances’ by PRS Legislative Research. With the GST compensation grants having ended in June 2022, there has been an adverse impact on some states, it said, adding that increasing the level of GST revenue may require rationalisation in tax slabs.
States continue to have a high level of committed expenditure, and persistent revenue deficit. Increase in non-merit subsidies, reversal of pension reforms, and poor financial conditions of state-owned discoms are some of the key challenges for state finances, the report said.
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