States with higher number of COVID-19 patients at greater risk of fiscal slippages: ICRA

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Published: April 8, 2020 7:43:35 PM

It said those state governments which have a larger portion of their revenue receipts dependent on GST compensation, face greater revenue and liquidity risk as collection from the cess would be adversely impacted during the year.

The ratings agency also said the COVID-19 outbreak would have an adverse impact on the other components of states’ own taxes.

States having higher number of COVID-19 patients run the risk of fiscal slippages, as they have to ramp up spending on health-related services to contain the outbreak, ratings agency ICRA said on Wednesday. The states which witnessed the return of considerable migrant workers and have a sizeable number of daily wage earners, could see a sharp rise in their revenue expenditure during the current financial year, ICRA said in a statement.

It said those state governments which have a larger portion of their revenue receipts dependent on GST compensation, face greater revenue and liquidity risk as collection from the cess would be adversely impacted during the year. The ratings agency also said the COVID-19 outbreak would have an adverse impact on the other components of states’ own taxes, including sales tax/VAT on petroleum products and motor vehicles tax.

Cautious spending on non-essential services like tourism, hospitality and recreation is likely to widen the gap between state GST collection and the projected revenues of 2020-21, ICRA added.

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