The Tamil Nadu government suffered an 85% fall in revenue collection of Goods and Services Tax (GST) in April, which was the first full month after the imposition of the COVID-19 lockdown since March 24.
This figure has been arrived at by comparing this year’s collections in April with those of the corresponding month in the previous year.
There was around 70% erosion in the overall revenue collection of commercial taxes (CT), including non-GST taxes such as State-level Value Added Tax on liquor, according to data available with the CT and Registration Department.
The CT collections are critical to the financial health of the State government as they are the largest contributor to the State’s Own Tax Revenue (SOTR), which, accounts for around 70% of the State’s total revenue receipts.
In respect of collections through registration of documents, the situation was much worse, as the degree of reduction was about 96%. An important aspect to be kept in mind here is that sub-registrar offices all over the State were allowed to function from April 20.
In May, there has not been any significant improvement in the collections of Commercial Taxes, says a senior official in the Finance department.
It is against this backdrop that Chief Minister Edappadi K. Palaniswami, who was recently apprised of the finances of the government, went on record saying that the State might incur an additional fiscal deficit of ₹35,000 crore this year. This would be over and above the estimated fiscal deficit of around ₹59,346 crore. This means that the total fiscal deficit for 2020-21 would be about ₹ 94,346 crore.
In such an eventuality, the fiscal deficit to Gross State Domestic Product (GSDP) ratio would go up to 4.5% from the original 2.84%.
For bridging the gap between revenue and expenditure, borrowing becomes inevitable, despite undertaking expenditure control measures, the official clarifies.
The lockdown came at a time when the State government struggled to have a minimum positive growth in the collections of commercial taxes and registration, both of which were hit by the general economic slowdown.
While the State managed to post a growth rate of 1.12% in CT, its performance in the collections of registration in terms of revenue saw a negative growth rate of (–) 0.39%.