New Delhi, May 30 (PTI) States can look at a higher revenue of ₹ 350-450 billion after GST implementation in mid-2017, says a Standard Chartered report.

According to Standard Chartered Bank's report titled India States' Finances: The other half of the story post GST implementation states can look at a total gain of ₹ 350-450 billion, roughly around 0.2-0.3 per cent of GDP.

The study that assessed underlying dynamics of various states' finances over a decade said if they can keep their fiscal deficits within the budgeted target, and the Central government adheres to its target of 3.2 per cent of GDP, the combined 2017-18 deficit could be 6 per cent (or lower).

The findings estimate that the 18 states tracked in the study aim to keep their 2017-18 fiscal deficit unchanged from 2016-17 at 2.7 per cent of GDP (excluding UDAY impact).

It is estimated that the risk of slippage is limited to 0.1 per cent of GDP as additional interest payments on UDAY bond issuance have been partially budgeted, most states are still assessing Pay Commission recommendations, and additional expenditure burden of farm-loan waivers for most states (apart from Uttar Pradesh) is likely to be small, the report said.

"The report expects limited risk of slippage unless several states unexpectedly implement salary increases mid- year. Hence, additional strain on fiscal deficits can be easily absorbed, as impending GST implementation in mid-2017 should mean higher revenues for all states," it said.

Moreover, the Central government has agreed to compensate states for any revenue loss for five years after GST implementation, it added.

GST revenue gains could bolster state finances while central compensation protects against shortfalls in early years. The report projects higher state revenues after GST implementation driven by the GST transition, contingent on states keeping fiscal deficits within budgeted targets and central adherence to fiscal targets; it identifies limited downside risk from UDAY interest, Pay Commission impacts and farm loan waivers, and highlights the Central government's five year compensation commitment for any revenue loss.