Amid reports of economic slowdown in the country, Tamil Nadu has recorded a modest growth rate of 4.64% in collections of commercial taxes in the first half of this financial year.
Without taking into account compensation due to the State under the scheme of goods and services tax (GST), the tax collection is estimated to be ₹42,765.12 crore.
If the compensation is added, the figure goes up to ₹47,963.12 crore, recording a growth rate of 16.49% .
The component of GST collections, without compensation, is ₹ 21,602.63 crore and with compensation, ₹ 26,800.63 crore.
The growth rate of the component is 29.19%, according to data provided by the Commercial Taxes and Registration Department.
Commenting on the development, D. Jayakumar, Fisheries Minister who represents the State at the GST Council, cites three reasons for the growth — a balanced mix of the contributions of sectors – industry and services apart from agriculture; the impact of higher economic growth rate achieved by the State during 2018-19 than the national average and better compliance by traders.
“Unlike Kerala, which is considered only a consumption State, ours is known for being both manufacturing and consumption State. Also, in view of higher economic growth rate in the previous year, the purchasing capacity of consumers in our State is also better than elsewhere. Besides, 90% of traders file returns as a matter of routine,” the Minister says.
A senior official, monitoring the working of Commercial Taxes department, says although the State is affected by “broader trends” of the economy, the State GST collections has been much better than in other States.
Apparently, “consumption contraction” has not yet taken place, going by the figures of collections, says K.R. Shanmugam, Director, Madras School of Economics.
One possible reason for the positive growth rate is that lowering of GST rates in recent months has led to more and more traders voluntarily filing their returns and becoming tax payers.
Incentives sought
K.E. Raghunathan, former president of the All-India Manufacturers Organisation (AIMO), says in his assessment, the perception of enhanced stability of political leadership, increased spending by the State government in the last eight months and the State’s high visibility of investment compared to neighbours have contributed to the positive growth rate. “The position could have been much better, had there been no slowdown,” he observes.
Calling upon the State government to take a cue from Mahatma Gandhi National Rural Employment Guarantee Scheme for curbing the growth in unemployment and providing “short-term” relief to micro, small and medium enterprises (MSMEs), he says the State government can provide a “subsidy” of ₹9,000 a month per skilled worker towards wages for three months to the MSMEs employing certain number of skilled workers and engaged in services.
This will enable large enterprises, having facilities in various other States apart form Tamil Nadu, to keep running their units here as they will be assured of services from the MSMEs.
