New paper urges Keralam to expand own revenue base, treat lottery receipts ‘prudently’

A new paper published by the Gulati Institute of Finance and Taxation (GIFT) has urged the state of Kerala to expand its own revenue base and treat lottery receipts with caution. The paper, titled 'State of Kerala State Revenue: Rich State, Thin Treasury,' highlights the need to improve revenue streams through various avenues, including land and property transactions, user charges, and refining the administration of Goods and Services Tax (GST) and public enterprise finances.

The paper emphasizes that while Kerala has increased its own revenue share from 65.6% in 2022-23 to 74.8% in 2025-26, this figure is not a reflection of fiscal strengthening due to the shrinking Central transfers. In fact, own revenue has dipped from 8.5% to 7.2% of Gross State Domestic Product (GSDP), and own tax revenue has decreased from 7.0% to 5.9%.

The authors suggest that stamp duty and registration should be expanded as an underutilized tax source by revising stamp duty rates with regular, GIS-based land fair value assessments and digital registration. They also recommend aligning land taxation with its usage and introduce means-tested user charges for sectors like public health and higher education.

Moreover, the paper cautions about the Integrated Goods and Services Tax (IGST) conundrum, where Kerala, despite being a consumer state, receives less IGST than it should. The authors urge caution towards the State lottery, a major component of the non-tax revenue, which contributes significantly to the State's overall receipts but has an unstable composition.

Lottery receipts represent between 73.8% and 78.7% of overall non-tax revenue, but the net take for the exchequer is a fraction due to prize payouts and commission fees.