Irrespective of whether the Tamil Nadu Cabinet would recommend extension of the COVID-19 lockdown or not on Saturday, the State government appears to be reconciling itself to the scenario of realising minimum revenue through State taxes in April.
In other words, it has to rely much more on its share in Central taxes and grants-in-aid from the Union government. Its dependence on the Centre is expected to continue during the first quarter (April-June), as policy-makers feel that it may take at least a few months to see signs of economic recovery, even if the lockdown gets lifted in May.
As per the Budget Estimate for 2020-21, the State Own Taxes Revenue (SOTR) is around ₹ 1,33,530 crore. In terms of monthly average revenue, it will be ₹ 11,127.5 crore. Even though it is too early to hazard a guess, the government is sure that only a negligible amount may get realised, that too if certain taxpayers come forward to make their remittances, understanding the government’s plight.
Traditionally, SOTR’s share in the total revenue receipts is around 60%. Non-Tax Revenue contributes about 9 % of the revenue. Approximately 31 % of the revenue receipts is from the Union government in the form of the State’s share in Central taxes and grants.
The State’s monthly average figure of total revenue receipts based on pre-COVID-19 calculations comes to around ₹ 18,281 crore. It would be a tall order if the total revenue receipts exceed the mark of ₹ 10,000 crore in April and even in May. The fall in SOTR is being visualised due to several factors such as 60-70% decline in consumption of petroleum products and ban on sale of liquor through retail outlets of the Tamil Nadu State Marketing Corporation Limited (TASMAC) and registration of documents, apart from reduction in the prices of petroleum products.
GST revenue
Besides, the government is not expecting much revenue through Goods and Services Tax in the next couple of months due to concessions announced by the Central government for firms. Those having an aggregate annual turnover less than ₹ 5 crore have been given three months (up to June last week) to file returns for March to May with no interest, late fee, and penalty.
For “bigger firms,” a similar concession has been provided, though late filing of returns after 15 days will carry 9 % interest. The State government is of the view that these firms too will make use of the extension of time under the given circumstances.
Even otherwise, during 2019-20, the State government experienced the pain of the general slump in the economy, which got reflected in terms of tepid growth in revenue. Amid a tight financial condition, it had made the full payment of salary to its employees for March, unlike in States such as Maharashtra, Andhra Pradesh and Telangana, which have either deferred their payment or decided to make the payment in two installments, a senior Tamil Nadu government official points out.
