South First brings to you a three-part series on fiscal federalism that explains why well performing states are accusing the Union government of fiscal injustice.
Karnataka leaders protest against Union government at Jantar Mantar, Delhi. (Supplied)
Alleging fiscal injustice, southern States like Karnataka and Kerala have taken the fight for equitable share of resources to the Union government’s doorsteps. With States like Tamil Nadu and Andhra Pradesh joining the chorus of South Tax Movement, the demand to preserve fiscal federalism is growing stronger. South First brings to you a three-part series on fiscal federalism that explains why well performing states are accusing the Union government of fiscal injustice. This first part in this series explains how much Southern states have contributed to the country’s revenues in the last five years. You can read the second part that explains how southern states received consistently reduced funds from the Union government over five fiscals here. You can read the third part that exposes the glaring gap in what Southern States give and what they get in return while Hindi-heartland states continue to get more funds despite reduced contributions here.
Amid allegations of fiscal mismanagement by the BJP’s national leadership, data offered by the Union Finance Ministry reveal that the five southern states — Karnataka, Tamil Nadu, Kerala, Andhra Pradesh, and Telangana — have registered a consistent upward growth in total revenue and net direct tax collections in the last five fiscal years.
In recent years, the southern states have emerged as significant contributors to India’s fiscal coffers, showcasing consistent growth trajectories amidst economic fluctuations and challenges.
While the incumbent BJP insists that States have received more funds under the NDA government in comparison to UPA government, data reveals that States’ contributions towards revenue have also increased multifold year-on-year.
The analysis is based on the written reply to an unstarred question of DMK MP P Wilson in the Rajya Sabha by Union Minister of State for Finance Pankaj Chaudhary on Tuesday, 6 February.
The Centre’s data show that South India contributed between 18.85 percent and 31.57 percent of the country’s total GST (CGST+SGST+IGST+Cess) collected between the 2018-19 and 2022-23 fiscals. This is excluding GST on imports and net central indirect tax collection.
Likewise, southern states’ net direct tax collection averaged a fourth of the country’s overall contribution during this period.
Karnataka’s contributions towards total GST+cess revenue collection in the country increased by 55.92 percent in the last five years.
Meanwhile, Tamil Nadu saw an increase of 47.98 percent, Andhra Pradesh recorded a hike of 58.78 percent, Kerala reported an increase of 67.42 percent, and Telangana saw an increase of 42.36 percent.
Similarly, the states’ contribution to net direct tax collection underscored their increasing significance in India’s fiscal domain.
Karnataka’s contribution recorded a hike of 73.86 percent in net direct tax collection from 2018 to 2023. Tamil Nadu, Kerala, Andhra Pradesh, and Telangana also reported increases — of 44.27 percent, 40.91 percent, 23.99 percent, and 226.8 percent, respectively.
From the fiscal year 2018-19 to 2022-23, the southern states’ contributions ranged from approximately 18.85 percent to 31.57 percent.
Similarly, in net direct tax collection, the region’s contributions steadily increased from 24.09% in 2018-19 to 26.17% in 2022-23, reflecting a notable upward trajectory and emphasising the region’s pivotal role in India’s fiscal domain.
Ironically, Karnataka, Tamil Nadu, Kerala and Andhra Pradesh continue to raise their voice and concerns over alleged financial injustice by the Union government in terms of reduced devolution of taxes.
The Karnataka, Tamil Nadu, and Kerala governments even protested in Delhi this week.
An analysis of revenue collection data reveals that several South Indian states demonstrated consistent growth in their earnings.
In this period, Karnataka’s revenue contribution increased by 55.92 percent, Tamil Nadu’s by 47.98 percent, and Andhra Pradesh’s by 58.78 percent.
Meanwhile, Telangana saw its revenue collection grow by 42.36 percent and Kerala reported a revenue hike of 67.42 percent in the same period.
The southern states also saw a consistent growth in net direct tax collection from the fiscal year 2018-19 to 2022-23.
However, the individual numbers varied by a great degree, reflecting the states’ current conditions.
In the last five years, Karnataka’s net direct tax collection increased by 73.86 percent. For Tamil Nadu, the figure was 44.27 percent.
Andhra Pradesh reported a net direct tax collection hike of 23.99 percent from 2018-19 to 2022-23 fiscals.
The figures for Telangana and Kerala were 226.8 percent and 40.91 percent, respectively, for the same period.
According to the figures provided in the Rajya Sabha, the revenue collection from CGST, SGST, IGST, and cess from the southern region was impressive.
The southern states contributed ₹2,27,405.86 crore approximately 20.56 percent of the total revenue collection in India, which stood at ₹8,76,770.28 crore in the 2018-19 fiscal.
In subsequent fiscal years, the southern region maintained its tempo of revenue generation by contributing 20.54 percent, 18.85 percent and 31.57 percent of India’s total revenue in 2019-20, 2020-21 and 2021-22, respectively.
However, the most recent data for fiscal 2022-23 indicated a notable decrease in the southern region’s revenue contribution from the previous year, standing at ₹3,46,633.47 crore.
This accounted for 20.74 percent of the total revenue collection in India, amounting to ₹13,24,985.50 crore.
Net Direct Tax collection comparison
South Indian states have emerged as critical players in the country’s fiscal domain, maintaining a notable upward path in its contribution to net direct tax collection.
In 2018-19, the southern states contributed 24.09 percent of the total net direct tax collection.
In 2019-20, 2020-21 and 2021-22, the contributions stood at 24.51 percent, 26.95 percent, and 26.16 percent of the country’s total net direct tax collection, respectively.
In 2022-23, the momentum continued with the southern states’ contribution reaching 26.17 percent of India’s total net direct tax collection.
This reflected a substantial increase to ₹4,31,973.61 crore out of the total collection of ₹16,17,932.86 crore.
The collection of cess (Central excise and service tax) is a pivotal indicator of economic dynamics.
The analysis reveals notable fluctuations in cess collection among key southern states, showcasing divergent growth trajectories and economic performances.
Leading the pack, Karnataka exhibited a remarkable surge in cess collection over the specified period. Starting at ₹10,079.32 crore in 2018-19, it increased to a staggering ₹13,342.37 crore in 2022-23.
Tamil Nadu registered a moderate increase from ₹7,168.02 crore in 2018-19 to ₹8,051.25 crore in 2022-23.
Andhra Pradesh reported a meagre cess collection of ₹272.54 crore in 2018-19, which rose more than 10-fold to ₹3,793.83 crore by 2022-23.
Telangana’s collection registered a slight decrease from ₹6,496.83 crore in 2018-19 to ₹6,480.57 crore in 2022-23.
Kerala’s figures were nominal. They were ₹64.01 crore in 2018-19 and ₹75.05 crore in 2022-23.
It may also be noted that cess collected from the states is not considered in the Union government’s devolution of taxes for them.
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