Punjab has seen tax buoyancy in the past two years, but the share of its own tax collection in the overall tax revenue of the state has not shown any improvement.
The state’s own tax revenue (SOTR), which has grown at 17% in the past two years, as a proportion of overall tax revenue of Punjab is below the pre-goods and services tax and pre-Covid levels.
The decrease in the share of SOTR implies increased dependence on devolution from the central government. The share of SOTR in the overall tax revenue in the post-Covid period of 2021-22 and 2022-23 was 73.2% as compared to 73.7% during 2018-19 and 2019-20, the two financial years immediately preceding the coronavirus pandemic, according to a report released last month by the Reserve Bank of India (RBI) on state finances.
The own tax collection, which includes revenues from state goods and services tax, sales tax/value-added tax, excise duty, stamp duty and registration fees, electricity duty and taxes on vehicles, made up 75.6% of the total tax revenue in the pre-GST period of 2015-16 and 2016-17. In the current financial year, the state government has pegged its own tax revenue at ₹51,835 crore and its share of central taxes at ₹18,457 crore.
A finance department official said the state’s tax buoyancy has improved in the past two years. “The SOTR share in overall tax revenue is below the pre-GST and pre-covid levels for two reasons. One, Punjab lost a major source of revenue when the levy of 5% purchase tax on MSP and infrastructure development fee of 3% on food grains was subsumed in GST when it was introduced in 2017. Then, there has been an increase in funds received from the central government as share of central taxes. The state’ own tax revenue share is much higher than the all-states average of 65%,” he said.
{{/usCountry}}A finance department official said the state’s tax buoyancy has improved in the past two years. “The SOTR share in overall tax revenue is below the pre-GST and pre-covid levels for two reasons. One, Punjab lost a major source of revenue when the levy of 5% purchase tax on MSP and infrastructure development fee of 3% on food grains was subsumed in GST when it was introduced in 2017. Then, there has been an increase in funds received from the central government as share of central taxes. The state’ own tax revenue share is much higher than the all-states average of 65%,” he said.
{{/usCountry}}Punjab is at number eight among the 18 major states for which OTR share data is available in the report. Gujarat, Chhattisgarh and Bihar are the states whose own tax revenue in post-Covid period has been below the pre- and post-GST and pre-Covid levels.