Senior officials from state government finance departments spoke to BloombergQuint on condition of anonymity to express their candid views.
Southern states, including Karnataka and Kerala, hope that a recent boost in GST collections will go some way to offset the loss of the compensation.
Kerala officials are counting on improved collections and flexibility of revenue from existing sources. Last year, the state collected Rs 1,000 crore per month on liquor taxes and its highest collection of Rs 4,000 crore on stamp duty and registration.
But even that has reached a saturation point, a Kerala official said.
An official from the Tamil Nadu Ministry of Finance said states would resort to revenue raising measures under their control. Some state-controlled taxes include stamp duty, registration, alcohol and fuel taxes, and local property tax.
Tamil Nadu has approved a general land tax overhaul to increase revenue for urban local government. The tax increase ranges from 25 to 100% for houses with an area of 600 to 1,800 square feet, and goes up to 150% for an area greater than 1,800 square feet in Chennai.
This alone could boost Chennai Municipal Corporation’s revenue by Rs 600 crore this year, the official quoted above said.
Tamil Nadu has also raised tax rates, from Rs 10 to Rs 80 per bottle, on foreign liquor made in India sold through Tasmac or Tamil Nadu State Marketing Corp. Hindu newspaper report.
Maharashtra has also unveiled a ‘Metro Cess’, which would increase stamp duty on property registration in the state from April. According to a Times of India report in March, stamp duty in Mumbai will increase by 1-6% of asset value and would be 7% in Pune, Nagpur and Thane.
Jharkhand is considering similar revenue collection measures. A significant portion of state revenue comes from minerals, coal in the lead. Dependence on coal is a concern as India seeks to phase out fossil fuels to meet its climate commitments, a state official has said.
Odisha is yet to make a decision, but state officials BloombergQuint spoke to said they are confident in meeting the revenue challenge. Odisha’s financial base is good and the state will make a decision after May when revenue collection figures are released, an official said. It is a surplus state and does not expect a big deficit, he said.