Punjab’s GST growth slows down to 4-year low at 5.97%

The growth in Punjab’s goods and services tax (GST) collection has slowed to a four-year low in the first half of the financial year 2024-25.

GST revenue increased by 5.97% year-on-year during the April-September period this year, rising to ₹10,799.64 crore from ₹10,193.94 crore in the same months of the previous fiscal year. This is around 41.94% of the full-year target of ₹25,750 crore set by the state government, according to data on key fiscal indicators released on Wednesday. The state government had projected a 12% increase in GST revenue in its budget estimates (BE) presented in March 2024 for the current year.

This is the lowest percentage growth in GST collection in four years. The state’s goods and services tax collection had risen by 20% and 18.14% during the April-September period of financial years 2023-24 and 2022-23, respectively. The sluggish growth in GST collection, the largest source of tax revenue in Punjab, has become the latest concern for the state government, which is grappling with mounting debt burden. The goods and services tax makes up almost a third of the state’s total tax revenue.

An official familiar with the matter attributed the sluggish growth to a higher base effect. “As the tax base increases, it becomes more difficult to sustain or improve the same level of growth. This year, revenue growth has slowed down at national level as well,” said the official, who requested anonymity. He added that the department is implementing a range of measures, including reviewing staff deployment and leveraging technology, to enhance monitoring and enforcement efforts for greater tax compliance. The department is also promoting its incentive-based ‘Bill Liao, Inam Pao’ scheme to raise tax awareness.

State excise, stamp duty collection rise

Despite the slowest growth in GST collection since April 1, 2021, the tax revenues of the state reported an increase of about 12% year-on-year in the first six months of FY25, rising to ₹35,014 crore from ₹31,221 crore collected in the same period of previous year. Though lower than the projected 15% growth in tax revenues, the increase came on the back of strong revenue flows from state excise duties, stamps and registration and the state’s share of central taxes.

The state excise collection increased by 15% year-on-year, with the state government raking in ₹5,163.61 crore between April and September against ₹4,490 during the same period of FY24. The excise collection is almost 50% of the revenue of ₹10,350 crore projected in BE 2024-25. The buoyancy in stamps and registration collection continued in the first six months of the current fiscal also, with revenue going up by 25% to about ₹2,699 crore from ₹2,146 last year.

Punjab also received ₹9,844 crore from its share of Union taxes, which though 20% more than ₹8,230 crore it got between April and September 2024, amounted to 45% of the ₹22,007 crore estimated by the state in the current fiscal year.

Non-tax revenue up, still far below target

Non-tax revenue collected from government services grew by 20% to ₹2,741 crore in the first six months, up from ₹2,282 crore during the corresponding period last year. However, this growth is far below the 51% year-on-year increase in non-tax revenue growth targeted by the state government this year. In the budget estimates 2024-25, the government raised its non-tax revenue collection target to ₹11,246 crore from last year’s actual collection of ₹7,231 crore.

₹21,119 cr borrowed in first half

According to fiscal indicators, the state government borrowed ₹21,119 crore during the April-September period of the 2024-25 financial year, which is 69.32% of the full-year net borrowing target of ₹30,464.92 crore.

This is the highest net borrowing by the state government in the first six months in recent years. In FY24, the state raised ₹20,446 crore between April and September with a higher net borrowing limit of ₹34,784 crore. The state government recently wrote to the central government for an additional borrowing limit of ₹10,000 crore for the current financial year.