The fears expressed over the Governments ability to achieve the target set for the commercial taxes collection for the financial year 2008-09 have come true. Commercial tax collections have fallen short of the target by a whopping Rs 346 crore.

Against the target of Rs 5,974 crore for the year 2008-09, the actual collection was only Rs 5,528 crore. The shortfall is noticed in almost all the categories like Orissa Sales Tax/Value Added Tax (OST/VAT), Central Sales Tax (CST), Orissa Entertainment Tax (OET) and Orissa Entry Tax (ET). The significant fact is the tax collection growth rate was at a high of 36 per cent in the first quarter of 2008-09, but could finally post a nominal growth rate of only 14 per cent for the whole financial year.

Category wise, it is observed that the growth rate of OST/VAT for 2008-09 was only 19 per cent, whereas the growth rate of CST has dropped to minus three per cent. Entry tax too had registered a negative growth rate of 0.2 per cent. The growth rate of professional tax too had seen a lower growth this year. Only, OET has registered a high growth of 25 per cent.

The fall in growth of taxes like OST/VAT, CST etc. poses a big challenge for the Government as OST/VAT has a 53 per cent share in the States GSDP.

Similarly, taxes on income, profession and others together account for around 13 per cent share. Thus, a shortfall would definitely have an adverse impact on the GSDP.

The nagging problem for the Finance Minister is to set right the consistent fall in the share of States own tax revenue in the revenue expenditure. The share has dropped to 32 per cent in 2008-09 from 38 per cent in 2006-07. Thus, the Government has to borrow more from market or other sources to fund its revenue expenditure or slash down its expenditure at the cost of growth.

It is observed that the steep fall in taxes has been due to poor performance of all the mines and mineral ranges/circles that contributed heftily towards States exchequer earlier. Almost all the circles/ranges have posted a shortfall in tax collections under all categories like OST/VAT, CST, ET and Professional taxes etc.