The State government, handicapped by a tepid growth rate of revenue collection in State taxes and a negative growth rate in realisation of its share in Central taxes, is thinking of increasing taxes such as State excise or vehicle tax.
A hint to this effect was dropped by Deputy Chief Minister O. Panneerselvam in a statement tabled in the Assembly on Thursday on mid-year review of trends in receipts and expenditure. In addition to mopping up tax collection, the government may take up “additional resource mobilisation as appropriate to make up for the revenue shortfall and achieve the revenue targets,” he told the House.
Initially, the government estimated that this year’s State Own Tax Revenue (SOTR), accounting for about 60% of the receipts, would grow at the rate of about 13.3% over the revised estimates of SOTR for 2018-19. But in the first six months, the rate of growth was a mere 3.42%.
Likewise, in respect of share in Central taxes, the State received ₹12,520 crore during April-September 2019, which was about 3.4% less than what it got in the same period last year. Expecting “a further significant shortfall in revenue” due to the Corporate Tax reduction announced by the Centre, Mr. Panneerselvam said “the negative trend in the share of Central taxes due to revenue under performance by the Government of India is a cause for serious concern.”
Revenue slump
Of the SOTR’s components, taxes on vehicles and stamps and registration had recorded the negative growth rate in their revenue collections, which were, in turn, attributed to the impact of “seasonal factors” and economic slowdown.
As for the share in Central taxes, the State received, in mid-December, ₹1,898 crore towards its share in Goods and Services Tax (GST) compensation.
A senior official says if the Centre follows it up with the release of around ₹3,370 crore towards grants meant for local bodies and nearly ₹4,070 crore towards arrears of the Integrated GST (IGST), the State’s revenue deficit could be brought down substantially. Otherwise, the deficit figure may eventually be much higher than the initial estimate of about ₹14,310 crore.
