Data: What is status of State’s Own Tax Revenue (SOTR) of various states?
Sai Krishna Muthyanolla
March 24, 2020
A major part of state government’s budgetary resources come from State’s Own Tax Revenue (SOTR). Here is a detailed analysis of SOTR & its share in overall tax revenue of states.
Likein the case of central government, each state incurs expenditure in the form ofadministrative costs, funding of various schemes, building of infrastructureetc. This is met by the income generated through various sources.
Theincome generated by states for various activities include revenue receipts liketaxes & grants and capital receipts like loans.
Ofthis, Tax Revenue forms a substantial portion of revenue receipts for most ofthe states. The tax revenue earned by the states further includes ‘States ownTax Revenue’ (SOTR) and their respective share in the Union Taxes. Thedevolution of union tax revenue to the states depends on the recommendations ofthe Finance Commission.
SOTR
varies from State-state
Stateswhich are able to generate more revenue on their own are less dependent on thedevolution & central grants. The generation of SOTR varies from state to state,with few states performing very well on this front and few others stilldepending largely on their share of Union Taxes and Grants-in-aid provided bythe Centre.
Ingeneral, SOTR includes revenues earned through – Sales Tax, State Excise duty,SGST, Land Revenue, Stamps & Registrations etc. Few states have other taxesrelevant to their own state.  In thisstory we analyse the trends of SOTR earned by the states for the five-yearperiod of 2014-19.
Theinformation submitted by each state to Comptroller and Auditor
General (CAG) is considered for this analysis. For the numbersrelating to 2018-19, ‘Monthly Key Indicator’ report for March-2019 isconsidered. For the numbers relating to the earlier years i.e. 2014- 18, theannual ‘Accounts
at a Glance’ report submitted by the states to the CAG isconsidered.  Delhi, Goa & Puducherryare excluded from the analysis as there is no data available on the CAGwebsite.
SOTR
accounts for more than 80% of the total tax revenue in Haryana, Karnataka,
Maharashtra & Telangana
Forthe year 2018-19, SOTR accounted for 83.79% of the tax revenue in Haryana. Evenin the four years prior to this, SOTR accounted for 88.62%, 84.91%, 83.76% and84.92% of the total tax revenue earned by the state. SGST followed by sales taxforms the major share of the SOTR in Haryana.
Telanganahas managed to increase the share of SOTR to 83.64% of the total tax revenue forthe first time in 2018-19. Although it did have a higher share of SOTR inearlier years, the share was in the 70s. This increase is both due to theincrease is SOTR for 2018-19 (by 10 thousand cores) as well as a fall in amountreceived as devolution of union tax revenue. It is also one of the few stateswhich is showing a year on year increase in the share of SOTR.
Apartfrom Haryana, Maharashtra is another state where the SOTR share is more than80% between 2014-19. In 2014-15, SOTR share in Maharashtra was highest at  86.71% of the total tax revenues. Share ofSOTR in the subsequent years fell slightly but is still in the 80s.
InKarnataka, the share of SOTR was 80.23% of its tax revenue  in 2018-19. In the previous years, it hoveredin lower 70s. In the year 2014-15, SOTR accounted for 82.73% of the total taxrevenue. The increase in 2018-19 is result of an increase in State taxrevenues.
Forall these four states, the tax revenue forms the major chunk of total revenuereceipts with Non-tax Revenue and Grants-in-aid contributing a minor share.
Share
of SOTR between 70 -80% of the total tax revenues for five states
In2014-15, the share of Kerala’s SOTR was at 81.63% of the total tax revenue. Inthe subsequent years, however, its share in the total tax has fallen while theamount has increased. In 2018-19, the share of SOTR in Kerala’s tax revenueswas 79.91%.
Andhra Pradesh has managed to increase its SOTR share in 2018-19 to 73.52%, an increase by 10% from the previous year. During the previous three years between 2015-18, the states SOTR share hovered in the 60s. Even in the case of AP, the recent increase is due to both the increase in actual SOTR as well as the decrease in the state’s share in union taxes.
Althoughthe three states of Gujarat, Kerala and Tamil Nadu have their SOTR share in 70sbracket, there is a consistent decline over the five-year period. Each of thesestates had the SOTR share in 80s in 2014-15. The proportionate increase of sharein Union taxes was higher than SOTR which led to this situation.
UP’s
SOTR share in total tax revenue crossed 60% in 2018-19
Uttar Pradesh has been among the low performing states in terms of Tax Revenues earned through SOTR. In 2014-15, the share of SOTR was 52.68% of the total tax revenue which further reduced in the subsequent three years to  47.13%, 44% and 44.61% respectively.  However, in 2018-19, there has been a steep increase in the share of SOTR to 60.95%. This increase is due to around 60% increase is SOTR compared to that of the previous year. The phenomenal increase in state GST collection in 2018-19 is the main contributor which increased to more than ₹ 82 thousand crores in 2018-19.
Chhattisgarh,Himachal Pradesh, Rajasthan, Uttarakhand and West Bengal all have recorded afall in their share of SOTR in total tax revenue year on year during the period2014-19. For these states’ revenue earned through SGST could not cover up thereduction relating to taxes on Sales, Trade etc.
Bihar
& Jharkhand have increased their SOTR share in 2018-19
As in the case with U.P, Bihar also saw a significant jump in SOTR in 2018-19. While the share of SOTR in total tax revenue is still a lowly 47.59%, this is a significant improvement over 28.74% and 35.96% in the previous two years. This increase can be attributed to a significant increase in the SGST collection. It also needs to be noted that since 2016-17, Bihar does not have income through Excise tax due to the prohibition of liquor in the state.
Althoughthere is an increase in Jharkhand’s SOTR in 2018-19, the state has reduced SOTRearnings during the five-year period. Assam, Madhya Pradesh & Odisha arethe other two states which have seen a fall in SOTR, with the reduced SGST collections.The share of SOTR data for 2017-18 and 2018-19 is not available for J&K. Buteven this state has shown a declining trend compared to the previous years. Jharkhanddoes receive a considerable amount in the form of Grants-in-aid from the Centre.
Majority
of the Tax revenue of North East states is their share of Union taxes
Overthe five-year period, the State’s share of Union Taxes received by ArunachalPradesh has increased from ₹ 1,109 crores to around ₹ 10 thousand crores.During the meantime, SOTR has only increased from ₹ 462 crores to ₹ 1,073crores. The share of SOTR has therefore fell drastically from 41.64% in 2014-15to only 9.33% in 2018-19.
Even the other states in North East India are also heavily dependent on their share of central taxes.  Among these states, Meghalaya and Tripura are considerably better with a higher SOTR share. However, even for these states, SOTR does not cross 30% with the major chunk of the tax revenue coming from their share in central taxes.
The data in respect to the division of tax revenue into SOTR and Share in Union taxes, is not available in 2018-19 for Sikkim, Mizoram and Nagaland. However, even these states show a significant fall in the share of SOTR.  Apart from the tax revenues, the North-Eastern states also receive substantial Grants-in-Aid.
Fall
in share of SOTR across multiple States
NorthEastern States, Bihar, Jharkhand, U.P etc. are the states with a lesser shareof SOTR and have been receiving a major portion of their tax revenue throughdevolution of union tax revenue.
Meanwhile,among the larger states, Maharashtra, Karnataka, A.P, Telangana, Kerala, TamilNadu etc. SOTR share is substantially higher in the state’s total tax revenues.
However, a common trend that can be seen in recent years (2014-19) is the general fall in SOTR across multiple states, including the higher-performing ones. One key contributor to this is the lower SGST revenues. In the case of some states like U.P, an increase in SGST revenue has helped in the increase of SOTR.
The states with a higher SOTR are also observed to have been doing well in their SGST collections. However, only two years of data is available post the implementation of GST and it would be too early to predict future trends.
Focus on creating avenues to increase SOTR could help in having stable budgets and economic planning, irrespective of the changes in the devolution of union tax revenue.