Top five industrial states of the country contribute more than 2/3rd of the direct taxes collected by the central government, even as less developed states like UP, Bihar and MP are taking away more than a third of the tax devolved by the Centre to the states, the government informed parliament on Monday.
Responding to a question in Lok Sabha, minister of state (MoS) for finance Pankaj Chaudhary tabled the total state-wise contribution of direct taxes and Central GST as also state-wise devolution of taxes from FY20 to FY24. As per the data tabled in parliament, five states – Maharashtra, Karnataka, Delhi, Tamil Nadu and Gujarat – accounted for 72% of the direct taxes and 53% of Central GST collected by the Union government in FY24.
These five states together contributed Rs 14.2 lakh crore of the total Rs 19.62 lakh crore collected in direct taxes – corporate and income taxes – in 2023-24. During the same year, these five states contributed Rs 2 lakh crore of the Rs 3.75 lakh crore collected through Central GST. GST has three components – Central, state and integrated GST. Integrated GST is collected on inter-state transfer of goods and services.
The five southern states – Tamil Nadu, Karnataka, Telangana, Andhra Pradesh and Kerala – together contribute 25% of the direct taxes and 27% of the Central GST collected during the financial year. Against this, these states received 15% from the Center’s divisible tax pool. The Union government shares 41% of the taxes collected by it with the states.
Poorer states like UP, Bihar and MP received 36% of the tax (Rs 4 lakh crore out of Rs 11.3 lakh crore) meant for sharing with the states. Against this, these three states contributed only 5% of the total direct tax and Central GST collected by the Centre during that period.
The Centre allocates its divisible tax pool among states based on a formula devised by the finance commission. The southern states have raised the issue of the skewed division of Central taxes meant for states, saying they are being deprived of funds for doing better than most North and eastern states.
The 16th Finance Commission headed by Arvind Panagariya is currently discussing with the states on the issue of distribution of taxes among states.
Source from: https://www.newindianexpress.com/business/2025/Mar/10/five-industrial-states-contribute-72-of-direct-taxes-2
