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Most sources of revenue in TN seen buoyant
July, 24th 2006

Shift to VAT could entail a drop in growth from commercial taxes

Figures of speech
Tamil Nadu's tax revenue is estimated at Rs 27,011 crore, 21.87 per cent higher than the revised estimates for 2005-06.
The growth is expected to sustain at about 12 per cent after the State shifts to value-added tax from January.


Tamil Nadu's revenue from stamps and registration fees during the current year is estimated at Rs 2,452 crore, 36 per cent more than the revised estimates for 2005-06 reflecting the buoyancy in housing and real estates sector.

The medium-term fiscal plan, presented as part of the 2006-07 budget, reflects similar buoyancy in most sources of revenue.

For instance, the State's own tax revenue is estimated at Rs 27,011 crore, 21.87 per cent higher than the revised estimates for 2005-06. The growth is expected to sustain at about 12 per cent in the coming years after the State shifts to value-added tax from January. This has been an important component of the State Government's strategy in containing deficit despite announcements of concessions, loan waivers of about Rs 7,000 crore and a food subsidy bill of about Rs 1,950 crore.

The Finance Secretary, Mr K. Gnanadesikan, briefing presspersons after the budget, said the shift to VAT could entail a drop in growth from commercial taxes by about Rs 2,400 crore. Centre's compensation apart, the loss is not of major concern, he said, as compliance under VAT and widening of the tax base is expected to improve.

This, he believed, would support the Government's welfare measures and help it stick to its targets under the Medium Term Fiscal Plan that envisages fiscal deficit as a percentage of gross State domestic product to be controlled at 2.3 per cent during 2008-09 from 3 per cent in the revised estimates in 2006-07.

Excise receipts are estimated at Rs 3,673 crore during 2006-07, a 22 per cent growth over the revised estimates for 2005-06.

Tax on vehicles is projected to grow at 10.15 per cent and is assumed to grow at 8 per cent in the future.

Share in Central taxes is as indicated in the Union Budget for 2006-07 at Rs 6,026 crore with a 13 per cent growth expected for 2007-08 and 12.5 per cent in 2008-09.

Justifying the tax-free budget, Mr Gnanadesikan pointed out that Tamil Nadu is among the highest taxed States and opportunities were limited for new sources.

According to the budget document, Tamil Nadu retains the highest tax GSDP ratio in the country and in 2006-07 revised estimates is expected to increase to 11.2 per cent.

Non-tax revenue alone reflects modest increases against this backdrop.

Non-tax revenue is estimated at Rs 2,674 crore in the revised budget estimates for 2006-07, which is a 9.41 per cent growth over that of 2005-06. This component is not expected to increase as most user charges collected are retained by various agencies that provide the services. Interest receipts were also bound to drop as Government lending to the public sector undertakings goes down. The document pegs the growth in revenue at 5 per cent in the future.

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