STATES have limited flexibility on their revenue after the implementation of Goods and Services Tax (GST), and some States may come under fiscal pressure following implementation of the 7th Pay Commission and waiver of farm loans, according to a new report titled “State of State Finances” by Roopal Suhag and Suyash Tiwari of PRS India, a think tank based in New Delhi.
The report also said that the proposed use of 2011 population data by the 15th Finance Commission could hit the devolution share of Tamil Nadu, Kerala, and Andhra Pradesh, and boost the share of Uttar Pradesh, Rajasthan, and Bihar.
According to the report, States are expected to spend 72 per cent more than the Central government in 2018-19, up from 46 per cent more in 2014-15.
On GST, it said that the tax reduces States’ flexibility on receipts, as the decision-making power of States will be limited to 35 per cent of their revenue.
Farm loan waivers by eight States, amounting to Rs.1,77,241 crore, may lead to higher borrowings by them, the report said.
States’ share in net proceeds of Union taxes and duties is estimated at Rs.7,68,413 crore in 2018-19.
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