: The growth in tax revenues of 16 States including Tamil Nadu between April and July this year is nothing to write home about, a report from Edelweiss Securities shows.
According to the brokerage firm, which analysed the finances of the 16 States that account for 70 per cent of tax revenues from all States, the tax revenues of these States showed just a 6 per cent growth year on year.
The States used for analysis are Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Tamil Nadu, Telangana and Uttarakhand.
The data was sourced from budget estimates, CAG reports and from the firm’s own sources.
The States have also been missing their tax targets for the past three years.
“The weakness is broad-based — reflected in land taxes, oil taxes as well as other consumption taxes. The oil tax revenue, of late, is picking up given the recovery in oil prices,” Kapil Gupta and Prateek Parekh, analysts at Edelweiss, said in the report.
They also pointed out that weakness in tax revenues does confirm that economic recovery is tepid and still not broad-based.
Among various sources of taxes from the State like oil, land and other consumption goods, land tax collections were the weakest, growing at mere 4 per cent during April-July 2016, said the report. The budgeted growth was 17 per cent.
Pay Panel impact
Edelweiss also said the lower land taxes showed that land prices were under pressure and transactions had slowed. The firm also expected oil taxes to improve going forward, mainly driven by the recovery in oil prices.
The only silver-lining is that the States are maintaining a robust pace of Plan expenditure, including the amount spent on electricity generation, infrastructure and education. The Planned expenditure of States is growing at 29 per cent on a year-on-year basis, against the budgeted 32 per cent.
However, the firm said the biggest challenge for Plan expenditure would come from the higher wage payout under the 7th Pay Commission. “In a scenario where tax revenues are not particularly robust, the States will eventually face a tough choice of either reining in Plan expenditure or slip on their budgeted fiscal targets,” the report said.
