An In-depth Overview of the Highest Tax Paying State in India

In the fiscal intricacies of India, tax collection is a fundamental pillar, with the central government amassing revenues to be shared among states and territories, a process supervised by the Finance Commission. As the highest tax paying state in India, Maharashtra, alongside Uttar Pradesh, Tamil Nadu, and Gujarat, significantly contributes to the nation's financial health, jointly shouldering over 70% of the net direct tax collections.

Regarding indirect taxes, the same states including West Bengal play a crucial role, accounting for 45% of the Goods and Services Tax (GST) revenue in the recent financial year. This article provides an in-depth overview of the states leading in tax revenues, exploring the dynamics behind the highest tax payers in India and their impact on the nation's economy.

Top-10 Highest Tax Paying States

Maharashtra

• Maharashtra stands as a financial powerhouse in India, with a staggering ₹4.25 lakh crores in direct tax collections and a robust taxpayer base of 130.74 lakhs. This fiscal strength is further underscored by its impressive GST collections, which have marked a significant growth of 18% from April to July in the current financial year.
• The state's highest monthly GST collection was recorded in April 2023 at ₹33,196 crore, demonstrating a 20.74% growth compared to the same month in the previous year. Despite a dip to ₹23,535 crore in May, the collections bounced back, with June and July witnessing an upward trajectory to ₹26,098 crore and ₹26,064 crore, respectively, outpacing the national growth rates.
• Direct tax contributions are bolstered by Maharashtra's economic environment, which is home to many of India's leading companies and high-net-worth individuals, including famous Bollywood stars and cricketers. The state's contribution of 38.3% to India's total direct tax collection in the financial year 2017-18 is a testament to its economic might.
  
  Key Financial Milestones of Maharashtra:

1. GST Revenue Growth:
2. • April 2023: ₹33,196 crore (20.74% growth over the previous year)
   • May 2023: ₹23,535 crore (15.87% deficit)
   • June 2023: ₹26,098 crore (16.82% growth)
   • July 2023: ₹26,064 crore (17.78% growth)
2. Direct Tax Collection:
3. • Financial Year 2017-18: ₹3.84 lakh crore
   • Financial Year 2018-2019: ₹4.25 lakh crore
   • Financial Year 2022-2023: ₹6.14 lakh crore (70% of the total collections)
3. Income Tax Returns (ITR) Filed:
4. • Financial Year 2022-2023: Most ITRs filed at 1.98 crore
4. Historical Tax Revenues (1990-91 to 1999-00):
5. • 1990-91: ₹51.2 crore
   • 1999-00: ₹172.7 crore
5. State's Goals:
6. • Aim for an annual GST collection of ₹1,36,041 crore
   • SGST revenue between ₹7,409 crore to ₹10,392 crore
     
     The consistent performance of Maharashtra's manufacturing and service sectors, along with concerted efforts by the central government to curb tax evasion, are key drivers for this financial success. The state's rise in GST revenue, which accounted for 15% of the national aggregate in 2022-23, is a clear indicator of its dominant role in India's economy.

Delhi

Delhi, the national capital of India, showcases a robust tax collection framework, with its taxpayers contributing significantly to the state's revenue. Here's a closer look at the fiscal performance of Delhi:

• Taxpayer Contributions and Tax Revenue Growth:
• • Total taxpayers: 43.04 lakhs.
  • Tax revenue for FY 2023-24 increased, as reported by Delhi's finance minister, Atishi.
  • GST and VAT collection saw a 14% rise to Rs 31,445 crore up to January 2024, compared to the same period in the previous year.
  • Vehicle tax collection grew by 11.9% to Rs 2,688 crore.
  • Stamp and registration fees, including land revenue, climbed by 16.8% to Rs 5,797 crore.
• Budget Allocations and Economic Growth:
• • The Delhi government's budget for FY 2024-25 is set at Rs 76,000 crore.
  • A projected tax-revenue increase of 6.4% to ₹58,750 crore for FY25 over the revised estimates for FY24.
  • GSDP growth for FY 2022-23 was 9.2%.
  • Significant budget allocations include Rs 8,321 crore for secondary education, Rs 2,036 crore for urban health services, and Rs 3,017 crore for capital outlay on roads.
• Fiscal Estimates and Strategy:
• • Revenue surplus estimated at Rs 5,769 crore for FY 2023-24, 40% lower than the previous year's revised estimates.
  • Fiscal deficit projected at Rs 10,386 crore, over double the revised estimates for the previous fiscal year.
  • The Delhi state budget for FY25 is slightly larger than FY23's budget, with no plans to increase levies or taxes.
  • The state's economic strategy focuses on stimulating consumption to boost demand.
    
    Delhi's financial landscape is marked by a steady increase in tax collections and strategic budget allocations aimed at fostering growth in various sectors. Despite not receiving a share of Central taxes, the state's own tax revenue and prudent fiscal management contribute to its economic resilience and recovery post-pandemic.

Karnataka

In Karnataka, the tax landscape is characterized by a significant taxpayer base and a variety of payment methods. The state reported tax collections amounting to ₹1.20 lakh crores, supported by 51.47 lakhs taxpayers. Taxpayers in Karnataka have multiple avenues for fulfilling their tax obligations:

• Payment Methods:
• • Taxpayers can make in-person payments at designated bank branches using challans.
  • Alternatively, online payments can be processed through the Bruhat Bengaluru Mahanagara Palike (BBMP) website or mobile application, providing convenience and efficiency.
    
    The process for property tax payments in Karnataka for the financial year 2023-2024 includes provisions for revised returns:
• Revised Returns:
• • Taxpayers are eligible to file revised property tax returns for the year 2023-2024.
  • The deadline for filing these revised returns is set for 31st March 2024.
  • While downward revisions are not permitted, any differential amount due can be paid either online or through challans.
  • It is mandatory to declare advertisement hoardings and telecommunication towers in the revised returns.
    
    Important dates for the fiscal year are crucial for taxpayers to avoid penalties:
• Dates to Remember:
• • A rebate period runs from 1st April 2023 to 30th June 2023.
  • Interest on the first half of the tax is applicable from 1st July 2023.
  • Interest on the second half starts accruing from 30th November 2023.
  • Penalties for late payments begin on 29th November 2023.
    
    For assistance and inquiries, taxpayers can reach out to the BBMP Head Office:
• BBMP Head Office Contact Information:
• • Address: Joint Commissioner of Revenue, NR Square, BBMP, Bengaluru.
  • Phone: (080) 2297 5555 or (080) 2266 0000.
  • Email: dcrev@bbmp.gov.in .
  • Business Hours: Monday - Saturday: 10am to 5.30pm (closed on 2nd & 4th Saturdays), with the office remaining closed on Sundays and government holidays.
    
    Professional tax is another component of the state's tax regime, applicable to individuals engaged in various professions, trades, and employments:
• Professional Tax in Karnataka:
• • The state mandates this tax for all working individuals, including those in private and government sectors, as well as self-employed professionals like doctors and lawyers.
  • The professional tax slabs in Karnataka are as follows:
  • • Monthly Salary ₹1 - ₹9,999: ₹0 per month.
    • Monthly Salary ₹10,000 - ₹14,999: ₹0 per month.
    • Monthly Salary ₹15,000 and above: ₹200 per month.
  • The tax rate for organizations based on the number of employees is:
  • • 1 to 5 employees: ₹1000.
    • 5 to 10 employees: ₹1500.
    • More than 10 employees: ₹2500.
  • Certain exemptions are in place for:
  • • Self-employed individuals not employed for over 120 days in a year.
    • Salaried individuals earning less than ₹15,000 per month.
    • Senior citizens above 60 years and individuals with certain disabilities.
    • Members of the armed forces and foreign technicians in Karnataka.
      
      Karnataka's tax system is designed to be comprehensive and inclusive, with a focus on ease of payment and a range of exemptions to cater to diverse taxpayer circumstances. The state's contribution to the overall State's Own Tax Revenues (SOTR) is notable, with Karnataka being one of the states contributing more than 70% to the SOTR.

Tamil Nadu

Tamil Nadu's economic landscape is marked by a strong tax revenue framework, with a significant contribution from the state's own tax revenue (SOTR). The state reported a robust collection of ₹74,238 crores in taxes, backed by a taxpayer base of 56.26 lakhs. Here are some key insights into Tamil Nadu's tax contributions and financial health:

• State's Own Tax Revenue (SOTR):
• • SOTR's contribution to Tamil Nadu's overall tax revenue has been consistently above 70%.
  • In the pre-GST period of 2015-16 to 2016-17, SOTR accounted for 78.8% of the state's tax revenue.
  • The post-GST and pre-COVID period saw SOTR at 79.1%, indicating a slight increase.
  • Following the COVID-19 pandemic, the SOTR share remained stable at 78.9%.
  • Sales tax/VAT was the dominant component of SOTR until 2016-17, after which SGST became the most significant source.
  • A general increase in SOTR post-GST has reduced Tamil Nadu's dependence on central devolution.
  • SGST collections have shown improvement since 2021-22, thanks to economic revival and better compliance.
• Tax Reforms and Financial Strategy:
• • Tamil Nadu has implemented tax reforms, such as revising excise duties on spirits and beer and updating fees in the liquor industry.
  • The state has focused on rate rationalization, amnesty schemes, improving collection efficiency, and technological advancements like end-to-end computerization.
  • Between 2014 and the previous year, the state contributed ₹5,16,000 crore to the Indian government but received only ₹2,08,000 crore in return.
  • The allocation of funds from the central government decreased from 5.305% to 4.079% between the 12th and 15th Finance Commissions, impacting the state's finances.
• Budget and Economic Projections:
• • For the financial year 2023-24, Tamil Nadu's GSDP is projected to be ₹28.3 lakh crore, a 14% growth from the previous year.
  • The estimated expenditure for 2023-24 (excluding debt repayment) is ₹3,65,321 crore, a 14% increase from the previous year.
  • Receipts for the same period (excluding borrowings) are projected at ₹2,73,246 crore, an 11% increase.
  • Proposed revenue expenditure and capital outlay for 2023-24 are ₹3,08,056 crore and ₹44,366 crore respectively, indicating a 12% and 16% increase over the previous year.
  • Subsidy disbursements are estimated at ₹35,280 crore for 2023-24.
  • Committed expenditure is expected to be ₹1,73,148 crore, accounting for 64% of the revenue receipts.
  • SOTR for 2023-24 is projected to reach ₹1,81,182 crore, marking a 20.61% growth from 2022-23 and accounting for 78.9% of the total revenue.
    
    These figures underscore Tamil Nadu's robust financial management and its strategic approach to taxation and budgeting, ensuring the state remains a significant contributor to India's tax revenues.

Gujarat

Gujarat's economy is on an upward trajectory, with its Gross State Domestic Product (GSDP) for the fiscal year 2023-24 projected at a substantial Rs 25,62,975 crore, a 13% increase from the previous year's revised estimate. The state's financial health is further evidenced by its per capita GSDP, which stood at Rs 2,81,804 in 2021-22, marking an 8% annual growth from 2018-19 to 2021-22. Gujarat's fiscal framework is designed to support this growth, with total expenditure (excluding debt repayment) for 2023-24 estimated at a significant Rs 2,70,270 crore, an 18% increase over the previous year.

• Taxpayer Base and Collections:
• • Taxpayers: 74.80 lakhs.
  • GST Collection FY 2023: Increased by 17.5% to Rs 1.14 lakh crore.
  • Total Tax Revenue FY 2023-24: ₹1.34 lakh crore.
• Revenue and Expenditure:
• • Estimated Receipts (excluding borrowings) for 2023-24: Rs 2,25,340 crore, up 15%.
  • Revenue Surplus for 2023-24: Rs 9,038 crore, 0.4% of GSDP.
  • Fiscal Deficit Target for 2023-24: 1.8% of GSDP (Rs 44,930 crore).
• Budget Highlights:
• • FY 2024-25 Budget: ₹3.32 lakh crore with no new taxes.
  • Developmental Expenditure: Nearly ₹2.14 lakh crore (64.4%).
  • Non-developmental Expenditure: ₹83,000 crore (25.1%).
  • Fiscal Surplus Aim for 2024-25: ₹146.72 crore.
    
    The state's revenue streams are bolstered by key earners such as stamp duties and electricity charges, which together contribute approximately ₹26,800 crore. These sectors have witnessed a steady annual growth rate, with stamp duties and electricity charges at 10.26%, while land revenue has seen an even higher hike of 13.26%. The overall annual growth rate for the government's tax income is a healthy 9.68%, and the GST revenue alone has increased by 9.59% compared to the previous year, reaching ₹93,615 crore. Over the past decade, Gujarat's tax income has seen a significant rise from ₹44,250 crore in 2011-12 to ₹97,709 crore in 2021-22.
    
    Gujarat's fiscal strategy is aligned with its economic goals, as evidenced by the budget for the fiscal year 2024-25 which reflects a 10.44% increase, amounting to ₹31,444 crore, over the previous fiscal year's budget estimate. This budgetary increase is directed towards developmental and non-developmental expenditures, with a clear focus on maintaining a fiscal surplus. Gujarat's financial planning is indicative of its status as one of the states with more than 70% of its revenue generated from the State's Own Tax Revenues (SOTR), highlighting its significant contribution to the overall economic fabric of India.

West Bengal

West Bengal's tax system has been undergoing significant changes to streamline processes and enhance compliance. With a taxpayer base of 56.21 lakhs and tax collections amounting to Rs. 44,638 crores, the state is taking progressive steps to manage and resolve tax disputes efficiently. Here are some key updates and features of West Bengal's tax framework:

• Settlement of Disputes (SOD) 2023 and Amendments:
• • Introduction of the Trade Circular on Settlement of Disputes (SOD) 2023 to simplify the resolution of tax-related disputes.
  • Authorization under sub-rule (1) of Rule 5 of the WBST (SOD) Rules, 1999, offering a legal framework for dispute settlements.
  • Recent amendments to the WBST SOD Rules, 1999, aim to modernize and update the tax dispute resolution system.
• Procedural Enhancements:
• • The SOD 2023 Form 1 is now available in PDF format, facilitating easier access and submission for taxpayers.
  • A clear procedure for generating an Application Reference Number for SOD-2023 applications is outlined, ensuring transparency and trackability.
  • A comprehensive presentation on SOD 2023 has been made available, offering taxpayers guidance on the new system.
• Tax Dispute Resolution and Compliance Notifications:
• • The WBST SOD Act 1999 has been updated by the Finance Act, 2023, reflecting the state's commitment to keeping its tax laws current.
  • Notification No. 02/2023-C.T./GST waives the late fee for non-filers of GSTR-10 if filed by 31.08.2023, encouraging timely compliance.
  • Notification No. 198-F.T. outlines a special procedure for registered persons engaged in manufacturing specific goods, like tobacco products, to streamline tax processes.
  • The WBGST (Second Amendment) Rules, 2023, bring comprehensive amendments to multiple rules, enhancing the tax regime's efficiency.
    
    In addition to these regulatory changes, West Bengal's fiscal health is reflected in its Gross State Domestic Product (GSDP) projections, with an anticipated growth of 10.6% over the previous fiscal year. The state's budgetary allocations and tax proposals for the year 2023-24 are designed to support this growth, with key highlights including:
• Fiscal Estimates and Tax Incentives:
• • Revenue deficit projected at 1.8% of GSDP, with a targeted fiscal deficit at 3.8% of GSDP for the fiscal year 2023-24.
  • Tax proposals include a rebate on stamp duty and circle rates for home buyers and a waiver of agricultural income tax on tea gardens for two consecutive years.
• Schemes and Welfare Initiatives:
• • The Bidhayak Elaka Unnayan Prakalp sees an increase in annual allocation for local development works, signifying a push towards regional progress.
  • The introduction of the Bhavishyat Credit Card scheme aims to empower young entrepreneurs by providing accessible loans for micro-enterprises.
• Tax Rates and Slabs:
• • The GST rate for goods in West Bengal stands at 5%, with exemptions for essential items like unbranded wheat, paddy, and rice.
  • Professional Tax Slab Rates for FY 2023-2024 are structured to ensure fairness, with no tax for incomes up to Rs. 10,000 and a maximum of Rs. 200 for incomes above Rs. 40,001.
    
    The state's proactive approach to managing its tax system and fostering economic growth is evident in these measures. With a focus on resolving disputes, enhancing compliance, and supporting citizens through welfare schemes, West Bengal's tax and fiscal strategies are geared towards sustainable development and financial stability.

Conclusion

The comprehensive analysis of tax contributions by various states in India illuminates the fiscal prowess and economic strategies pivotal to the nation's growth. Through the diligent examination from Maharashtra's unparalleled direct tax contributions to West Bengal's innovative tax dispute resolutions, we see a tapestry of financial diligence shaping India's economic future. These insights not only emphasize the regional strengths but also delineate the intricate interplay between state economies and the national financial framework.

In light of these findings, it becomes imperative for policymakers, stakeholders, and citizens alike to remain informed and engaged with the evolving tax landscape. As India continues to forge its path in global economics, the proactive participation of every entity is crucial. To stay updated with the latest financial developments and leverage the power of informed decision-making, you're encouraged to visit our insightful resource for continuous updates on India's economic pulse.