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

Keralam should improve its own-revenue streams by tapping land and property transactions, user charges and finetuning its Goods and Services Tax (GST) administration and the finances of public enterprises, a new paper published by the Gulati Institute of Finance and Taxation (GIFT) has suggested.The paper, ‘State of Kerala State Revenue: Rich State, Thin Treasury’ urges the State to treat the State lottery “prudently.” Lottery receipts, it said, should be “regarded as a volatile stream to be diversified away from, not as a stable component of own revenue on which expenditure commitments can rest.” Written by Kiran Kumar Kakarlapudi, L. Anithakumary, Sumalatha B.S. and Shency Mathew, the paper has appeared in Economy and Fiscal Watch, the new GIFT quarterly. The authors looked at the State’s revenue performance over a four-year period from 2022-23 to 2025-26.‘Principal instrument’Own revenue remains the State’s ‘’principal instrument’’ in a scenario where the Finance Commission share is fixed and the GST compensation era is over, the authors observed. The impression of growing self-reliance created by Keralam raising three-quarters of its revenue from its own sources -- up from 65.6% in 2022-23 to 74.8% in 2025-26 -- is dispelled when revenue is weighed against the economy, they argued. Shrinking Central transfers meant own revenue automatically became the larger slice of a smaller cake. Own revenue dipped from 8.5% to 7.2% of GSDP, and own tax revenue from 7.0% to 5.9%. “A rising own-revenue share alongside a falling own-revenue GSDP ratio is not fiscal strengthening. It describes a State thrown back on its own resources at the very moment those resources were losing pace,” the paper said.The observations have come at a time when the government has stated that Kerala is passing through tough times financially. Terming stamp duty and registration as Keralam’s largest ‘idle base’ and the most underutilised tax source, the authors suggested expanding this base by pairing stamp duty revision with regular, GIS-based revision of land fair values and end-to-end digital registration. Land taxation should be aligned with the use to which land is put. “The official fair value of land, revised infrequently, lags far behind market values, so that every transaction registered at yesterday’s values is revenue silently forgone,” they noted.Other suggestionsOther suggestions include introduction of means-tested user charges (where what you pay is based on your income) in sectors such as public health and higher education, and improving governance in State enterprises to raise the non-tax revenue. Further, the paper had advised the State to urgently address the Integrated GST (IGST) conundrum, where it -- despite being a consumer State -- receives far less than it should.The paper advised caution with respect to the State lottery, a major component of the State’s own non-tax revenue (ONTR). On paper, Keralam is a non-tax overachiever, but the ONTR composition tends to erase that impression. General Services, the head under which lottery is accounted, supplied 82.8% to 85.2% of ONTR from 2022-23 to 2025-26, with lottery alone contributing between 73.8% and 78.7%.However, the exchequer’s net take from lottery is a fraction of the overall receipts, minus the prize and agents’ commission payouts. Secondly, the stream is not stable, resting on discretionary spending by largely modest-income households and exposed to factors such as shifts in consumer behaviour and regulations, the paper observed. Published - October 10, 2026 05:25 pm IST