States May Gain Rs 350-450 Billion In Revenue Post GST

States can look at a higher revenue of Rs. 350-450 billion after GST implementation in mid-2017, says a Standard Chartered report.

According to Standard Chartered Bank's report titled India - States' Finances: The other half of the story post-GST implementation states can look at a total gain of Rs. 350-450 billion, roughly around 0.2-0.3 per cent of GDP.

The study that assessed underlying dynamics of various states' finances over a decade said if they can keep their fiscal deficits within the budgeted target, and the Central government adheres to its target of 3.2 per cent of GDP, the combined 2017-18 deficit could be 6 per cent (or lower).

The findings estimate that the 18 states tracked in the study aim to keep their 2017-18 fiscal deficit unchanged from 2016-17 at 2.7 per cent of GDP (excluding UDAY impact).

It is estimated that the risk of slippage is limited to 0.1 per cent of GDP as additional interest payments on UDAY bond issuance have been partially budgeted, most states are still assessing Pay Commission recommendations, and additional expenditure burden of farm-loan waivers for most states (apart from Uttar Pradesh) is likely to be small, the report said.

"The report expects the limited risk of slippage unless several states unexpectedly implement salary increases mid-year. Hence, additional strain on fiscal deficits can be easily absorbed, as impending GST implementation in mid-2017 should mean higher revenues for all states," it said.

Moreover, the Central government has agreed to compensate states for any revenue loss for five years after GST implementation, it added.

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