Despite buoyancy, Punjab’s tax revenue share is below the pre-Covid level

The state of Punjab has experienced a decrease in its tax revenue (SOTR) as a proportion of the overall tax revenue, falling below pre-Goods and Services Tax (GST) and pre-COVID-19 levels. Over the past two years, SOTR has grown at 17%, but its share in the overall tax revenue has declined. This decline indicates an increased reliance on devolution from the central government. The Reserve Bank of India (RBI) released a report last month on state finances, revealing that the share of SOTR in overall tax revenue in the post-COVID period of 2021-22 and 2022-23 was 73.2%, compared to 73.7% in the two years preceding the pandemic.

In the pre-GST period of 2015-16 and 2016-17, own tax collection, including 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, constituted 75.6% of the total tax revenue. However, in the current financial year, the state government has estimated its tax revenue at ₹51,835 crore and its share of central taxes at ₹18,457 crore.

According to a finance department official, Punjab's tax buoyancy has improved in the last two years, but the decline in SOTR's share is attributed to the loss of a significant revenue source when certain taxes were subsumed into the GST in 2017. Additionally, an increase in funds received from the central government as a share of central taxes has contributed to the shift. Punjab ranks eighth among 18 major states in terms of SOTR share, with Gujarat, Chhattisgarh, and Bihar experiencing lower levels in the post-COVID period compared to pre-GST and pre-COVID levels.

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