State’s Own Taxes clock 10.5% growth rate

Managers of the finances of the State government are a relieved lot. For the first time in four years, the growth rate of the State’s Own Tax Revenue (SOTR) for the just-concluded financial year of 2017-2018 is expected to be in double digits. As the managers are still in the process of computing data regarding different components of the SOTR collections, the provisional growth rate is around 10.5%, a senior official in the State Finance Department says, adding that final figures are not yet available.

The growth rate touched a peak of 19.72% during 2012-2013 but went down steeply and was in the range of 2.3% to 6.8% for the next four years. This was essentially attributed to “ripple effects of economic stagnation.” In those years, the collections of commercial taxes (CT), the most important component of the SOTR, witnessed a very low growth rate and reduced collection of sales tax on petroleum products.

In March last year, the government decided to increase the rate of Value Added Tax on petrol, with or without additives, from 30% to 34% and on High Speed Diesel Oil from 23.43% to 25%. Similarly, it chose to introduce additional tax, not exceeding 5%, on the taxable turnover of intra-State sale of alcohol. According to the official, these measures have fetched around ₹3,000 crore more.

GST impact

Of around ₹95,000 crore that is expected to be netted through the SOTR, the CT accounts for about ₹73,128 crore, which is about 10.5% more than what was collected during 2016-17. Collections under the Goods and Services Tax (GST), which are shown under the overall figure of CT, were of the order of ₹16,000 crore between July 2017 and March 2018. [GST was launched on July 1, 2017].

Keeping 2015-2016 as the base year, a growth rate of 14% per year has been adopted for calculating the revenue of States to determine compensation. Under this arrangement, the Central government, up to February 2018, provided a compensation of ₹1,936 crore to Tamil Nadu, according to a senior official in the Commercial Taxes department.

Though there are, of late, indications of higher growth rate, the authorities are saying it is too early to judge the impact of the GST.

Collections through stamps and registration fees showed an increase of about ₹2,030 crore as the overall figure for the year was ₹9,038.22 crore. A growth rate of around 29% was recorded. Even though the guideline value was cut by 33% in June last year, the authorities increased the rate of registration fee from 1% to 4% in respect of instruments of conveyance, exchange, gift and settlement among non-family members.

Central grants down

Even as the State is showing some signs of recovery in revenue collections through its taxes, the Central government’s grants will be down by about ₹1,950 crore as local bodies’ elections were not held. As for the overall impact on revenue deficit, the figure is expected to be around ₹17,200 crore as against the revised estimates of ₹18,370 crore.