Centre cuts June tax transfers to states by 9%

By: Prasanta Sahu

New Delhi: The June tax transfers to states are understood to be 9% less than the monthly transfer of Rs 46,083 crore in the April-May period, at around Rs 42,000 crore.

The customary pattern is the Centre makes adjustments on state tax transfers based on actual receipts only during February-March, the final two months of a financial year.

Till then the states get their shares as budgeted. Since states are facing a huge shortfall in their own tax revenue (including S-GST collections the shortfalls of which are not duly compensated owing to the overall decline in GST revenue growth), the deviation from this practice so early in the fiscal will hit them hard.

Also, the Centre’s claim that it has transferred the entire budgeted amount to states as tax devolution in April-May may not strictly hold true, given that in the comparable period in FY20, the monthly transfer was higher at Rs 49,544 crore.

In FY20, the tax devolution was a little over Rs 1 lakh crore less than in the previous year at Rs 6.5 lakh crore and the amount budgeted for FY21 is Rs 7.84 lakh crore.

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