Nine years into GST, more than a third of every rupee India's states raise from their own taxes still comes from two things GST was never allowed to touch: fuel and liquor. This piece pulls together the national composition of state own-tax revenue and a state-by-state breakdown to show exactly how load-bearing that "fuel plus bottle" combination actually is — and why, constitutionally, one of the two is excluded from GST forever while the other is merely deferred.
Policy · Public Finance · Fiscal Federalism
Fuel and the Bottle: The Two Taxes States Never Handed to GST
1. The national picture: four taxes, 90% of the money
States' own tax revenue is estimated at 6.8% of GSDP in 2025-26, and it breaks down into a small number of large buckets. According to PRS Legislative Research's State of State Finances report (Budget Estimates, 2025-26, compiled from state budget documents), the composition nationally is:
Add the remaining "other sources" (roughly 10%) and the four named buckets above account for close to 90% of what a state government raises on its own. Put fuel VAT and liquor excise side by side and they total 34% of national own-tax revenue — a third of the money, from two commodities, sitting entirely outside the GST regime that everything else has been folded into since 2017.
2. State by state: who leans on fuel and liquor the hardest
The national average hides real spread. Using the same source's state-level composition (each component as a % of GSDP, 2025-26 Budget Estimates), the combined fuel-VAT-plus-liquor-excise share of a state's own-tax revenue ranges from under 10% in a strict prohibition state to over 55% in states that lean on it heavily:
| State | SGST, % GSDP | Fuel VAT, % GSDP | Liquor excise, % GSDP | Stamp duty, % GSDP | Other, % GSDP | Own-tax total, % GSDP | Fuel+liquor share of own-tax, % |
|---|---|---|---|---|---|---|---|
| Uttar Pradesh | 4.2 | 1.5 | 2.0 | 1.2 | 0.6 | 9.5 | 36.8 |
| Telangana | 2.8 | 2.1 | 1.5 | 1.1 | 0.6 | 8.1 | 44.4 |
| Chhattisgarh | 2.9 | 1.4 | 2.0 | 0.6 | 1.6 | 8.5 | 40.0 |
| Maharashtra | 3.6 | 1.4 | 0.7 | 1.3 | 0.9 | 7.9 | 26.6 |
| Rajasthan | 3.2 | 1.5 | 1.0 | 0.7 | 0.7 | 7.1 | 35.2 |
| Goa | 3.4 | 1.5 | 0.8 | 0.9 | 0.5 | 7.1 | 32.4 |
| Punjab | 3.1 | 0.9 | 1.3 | 0.8 | 1.0 | 7.1 | 31.0 |
| Jammu & Kashmir | 4.9 | 0.7 | 1.0 | 0.3 | 0.6 | 7.5 | 22.7 |
| Karnataka | 3.0 | 0.9 | 1.3 | 0.9 | 0.7 | 6.8 | 32.4 |
| Haryana | 3.1 | 0.9 | 1.0 | 1.2 | 0.5 | 6.7 | 28.4 |
| Jharkhand | 2.8 | 1.7 | 0.5 | 0.3 | 1.1 | 6.4 | 34.4 |
| Kerala | 2.6 | 2.4 | 0.2 | 0.5 | 0.7 | 6.4 | 40.6 |
| Madhya Pradesh | 2.5 | 1.3 | 1.0 | 0.8 | 0.8 | 6.4 | 35.9 |
| Andhra Pradesh | 2.2 | 1.1 | 1.5 | 0.7 | 0.4 | 5.9 | 44.1 |
| Meghalaya | 3.1 | 1.8 | 1.0 | 0.1 | 0.3 | 6.3 | 44.4 |
| Himachal Pradesh | 2.6 | 0.9 | 1.3 | 0.2 | 1.3 | 6.3 | 34.9 |
| Uttarakhand | 2.6 | 0.6 | 1.2 | 0.7 | 0.6 | 5.7 | 31.6 |
| West Bengal | 2.4 | 0.7 | 1.1 | 0.5 | 0.8 | 5.5 | 32.7 |
| Bihar | 3.1 | 1.0 | 0.0 | 0.8 | 0.6 | 5.5 | 18.2 |
| Odisha | 2.7 | 1.5 | 0.9 | 0.2 | 0.9 | 6.2 | 38.7 |
| Tamil Nadu | 2.6 | 2.0 | 0.4 | 0.7 | 0.5 | 6.2 | 38.7 |
| Gujarat | 2.7 | 1.1 | 0.0 | 0.7 | 0.8 | 5.3 | 20.8 |
| Assam | 2.4 | 1.2 | 0.6 | 0.1 | 0.4 | 4.7 | 38.3 |
| Sikkim | 2.0 | 0.3 | 1.0 | 0.0 | 0.3 | 3.6 | 36.1 |
| Arunachal Pradesh | 1.4 | 1.4 | 0.8 | 0.0 | 0.3 | 3.9 | 56.4 |
| Nagaland | 2.8 | 0.7 | 0.0 | 0.0 | 0.6 | 4.1 | 17.1 |
| Manipur | 2.2 | 0.7 | 0.1 | 0.0 | 1.4 | 4.4 | 18.2 |
| Mizoram | 3.2 | 0.4 | 0.0 | 0.1 | 0.4 | 4.1 | 9.8 |
Source: PRS Legislative Research, State of State Finances 2025 (October 2025), Figure 20, "Composition of own tax revenue in 2025-26 (as a % of GSDP)," compiled from state budget documents. Delhi and Puducherry are excluded from the source chart because their 2025-26 GSDP estimates were unavailable. "Fuel VAT" is the report's Sales Tax/VAT category, which the report notes states levy chiefly on petroleum products and alcohol combined — here shown net of the separately-reported Excise Duty line, so it should be read as predominantly, not exclusively, fuel. Figures are rounded to one decimal place as published; totals and shares are this piece's own arithmetic on those published figures and may not sum exactly due to rounding.
3. The pattern: prohibition states, and everyone else
Three states sit at the bottom of the fuel-plus-liquor dependence table for the same structural reason: Bihar (18.2%), Gujarat (20.8%) and Mizoram (9.8%) all enforce full or partial alcohol prohibition, which zeroes out the excise line entirely and leaves them dependent on fuel VAT alone for this category. Manipur (18.2%) and Nagaland (17.1%) land in the same low band for a related reason — both have long-standing partial prohibition or restricted-sale regimes. PRS's own report makes the same point directly, attributing Bihar and Gujarat's below-average own-tax-to-GSDP ratios in part to "close to zero revenue collection from excise" in those two states.
At the other end, Arunachal Pradesh (56.4%), Meghalaya and Telangana (44.4% each), and Andhra Pradesh (44.1%) lean on the fuel-and-bottle combination for well over two-fifths of everything they raise themselves. Kerala's case is distinctive: at 40.6%, its dependence runs almost entirely through the fuel VAT line (2.4% of GSDP, the highest fuel-VAT share of any state in this table) rather than liquor excise (0.2%, one of the lowest) — the reverse pattern from Andhra Pradesh and Telangana, where excise does more of the work. Tamil Nadu shows the same fuel-heavy, excise-light pattern as Kerala (2.0% fuel VAT vs. 0.4% excise), which is worth reading alongside this blog's own Tamil Nadu GST-gap piece — a state already flagged there as under fiscal pressure from flat GST collection is also one of the more fuel-VAT-dependent states in the country, which raises the stakes on that piece's underlying question of how TN grows its own-tax base.
Uttar Pradesh is the outlier that combines both: the highest own-tax-to-GSDP ratio in the country (9.5%, consistent with this blog's own GST-puzzle piece on UP) and a meaningfully above-average fuel-plus-liquor share (36.8%) at the same time — UP's 2.0% GSDP from liquor excise alone is tied for the highest of any state in this table.
4. Why these two stay outside GST — and it's not the same reason
It's tempting to treat "fuel and liquor are outside GST" as one fact. Constitutionally, it's two different facts with two different levels of permanence:
Alcohol is excluded from GST by the Constitution itself, permanently. Article 366(12A), the clause added by the 101st Amendment that defines "Goods and Services Tax" for the whole Constitution, defines GST as a tax on the supply of goods or services except "alcoholic liquor for human consumption." That's not a policy choice the GST Council can revisit — the tax on liquor was never brought inside the constitutional definition of GST in the first place, and un-defining it back in would require another constitutional amendment, not a Council vote.
Fuel is inside GST's constitutional definition but deferred by a live policy decision. Petroleum crude, high-speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel are all listed in the same Article 366(12A) framework as goods GST can cover — the 101st Amendment's own proviso says GST "shall be levied with effect from such date as may be notified by the Government on the recommendation of the GST Council." That date has never been notified, going on nine years now, but nothing in the Constitution prevents the Council from setting one tomorrow. This piece's own earlier reporting on GST devolution found the same open question: the Council can recommend a date for petroleum crude, petrol, natural gas and ATF to enter GST, and "it has not yet done so."
5. Where this connects to the rest of this blog's fuel-tax coverage
This national and state-level breakdown sits underneath several pieces already published here. The ethanol SGST rate-scenario piece and the case for biofuels over imports both work from the same underlying fact this piece quantifies directly: fuel taxation is a genuinely large lever in most state budgets, not a marginal one, which is exactly why a shift in how much of the petrol litre is ethanol (taxed at GST, inside the system) versus petrol (taxed at VAT, outside it) moves real money for a state treasury. Telangana's position in this piece's table — a 44.4% fuel-plus-liquor dependence, among the highest in the country — lines up with its identification elsewhere on this blog as the state with the highest petrol VAT rate (35.2%) and the most exposed to the ethanol-blending VAT shortfall described in the SGST-versus-devolution piece. The CNG VAT harmonization piece's core trade-off — cutting CNG VAT costs a state real revenue, which is why it proposed funding that cut from ethanol-SGST recoveries rather than asking a state to absorb it outright — reads differently once you see, as this table shows, that fuel taxation broadly is already a third or more of many of those same states' entire own-tax base; there is very little room in most state budgets to give fuel-tax revenue away without a matching recovery elsewhere.
Postscript, in verse — on why an SGST on ethanol is really a small step toward the bigger fuel-under-GST question this piece has been circling:
CGST, SGST, and IGST — behold the confusion,
With devolution too thin, cue talk of revolution;
Ethanol's the new brew,
Petrol's purity's askew —
Could federal tax be the true resolution?
Related on this blog
See also: Who Collects India's GST, and Who Actually Gets It Back, Would More SGST Fix the "Donor State" Problem?, Push the Ethanol SGST Rate From 2.5% to 5% and Beyond, A Tax Play: Grow Ethanol SGST Revenue, Cut CNG VAT to Match Low-Tax States, Tamil Nadu's GST Gap, Uttar Pradesh's GST Puzzle
Sources
- PRS Legislative Research, "State of State Finances 2025" (October 2025) — national and state-wise composition of own-tax revenue as % of GSDP, 2025-26 Budget Estimates, compiled from state budget documents
- Constitution of India, Article 366(12A), as inserted by the Constitution (101st Amendment) Act, 2016 — definition of "Goods and Services Tax" and its exclusion of alcoholic liquor for human consumption
- This blog's own GST devolution piece — on the GST Council's still-unexercised power to notify a date for petroleum crude, petrol, natural gas and ATF to enter GST
- This blog's own CNG VAT and ethanol SGST reform series — state-level petrol VAT rates and CNG VAT rates referenced in Section 5
All state and national figures in this piece are Budget Estimates for 2025-26 as compiled by PRS Legislative Research from state budget documents, not audited actuals — actual year-end collection can and does diverge from budget targets, sometimes materially (this blog's own reporting has separately flagged Uttar Pradesh's own-tax revenue as consistently realising below its budget target in past years). The "Fuel VAT" column is this piece's own label for the source report's "Sales Tax/VAT" category; the source report describes this category as covering fuel and alcohol together in principle, but reports it net of the separately-itemised Excise Duty line, so this piece treats the two as distinct and labels them accordingly. Figures are rounded to one decimal place as published in the source; percentage-of-own-tax shares are this piece's own arithmetic on those rounded figures and carry the resulting small rounding uncertainty.
About this article: Researched, written and edited by Umashankar Triplicane Dwarakanathan, with AI research assistance; every figure is meant to trace to the primary source cited. See the Editorial Policy for how sourcing, AI use and corrections work.
