Expressing concern over the unprecedented hike in sales tax by some states as a part of rationalisation of tax structure, the chamber felt that the concept should be reviewed.

Assocham president Shekhar Bajaj, in a statement issued here, called for urgent steps to mobilise more non-tax revenue by increasing the user charges on various social and economic services provided by the state governments and by restructuring the state public sector units to improve their profitability.

State finances have shown no significant improvement in recent years despite the attempts at reforms in various states. The ratio of states' own tax revenue to the domestic product has remained stagnant and even declined during the nineties indicating lack of sufficient efforts for additional resource mobilisation and the share of the states non-tax revenues in the gross domestic product has declined sharply since the mid-nineties.

Bajaj felt that the poor quality of government spending was a major factor contributing to the deteriorating state finances.

The chamber pointed out that though the ration of state government spending to the gross domestic product had been lowered, the quality of government spending continued to deteriorate.