Despite a sluggish economy and falling State’s own tax revenue, Chief Minister O. Panneerselvam, also the Finance Minister, presented a budget free of fresh taxes ahead of the election year.
Though devoid of any major announcements, the Chief Minister has kept the tradition of a welfare state alive by allocating 33 per cent for social sector spending that included subsidies.
Value Added Tax (VAT) for cellular phones, LED lamps, air compressors and pump sets up to 10 HP and their parts was reduced from 14.5 per cent to five per cent. A range of fishing equipment were exempted from VAT benefitting the fishermen community.
To boost the manufacturing sector bogged down by negative sentiments, he provided certain critical concessions like withdrawal of electricity tax on generating plants using biomass (excluding bagassee).
He announced withdrawal of input tax credit reversal imposed at the rate of three per cent on the inter-State sale of goods to make manufacturing industries in Tamil Nadu more competitive with their counterparts in neighbouring States. Tax concessions, which will result in a loss of Rs. 650 crore to the exchequer per annum, were also announced.
Roughly estimating that Tamil Nadu would lose about Rs 35,485 crore in the next five years due to changes in devolution of Central taxes and grants-in-aid by the Centre based on the recommendations of the 14th Finance Commission, he said the State government would be burdened with a heavy responsibility of implementing additional schemes from its own resources.
The State has fixed a moderate growth rate of 12.02 per cent for the fiscal year. Admitting that the growth in the SOTR was a serious challenge to the State consecutively for the second year, he said the government was not increasing any taxes to mobilise more resources, but would rely more on tightening the collection system to realise revenue projections.
The Chief Minister said revenue deficit was inevitable due to the increase in the allocation of subsidies and allocation to social sector despite slow tax growth.
The revenue deficit for the 2015-16 has been projected at Rs 4,616.02 crore with revenue receipts of Rs 1,42,681.33 crore and revenue expenditure Rs 1,47,297.35 crore. The fiscal deficit is estimated at Rs 31.829.19 crore.
