Thiruvananthapuram: It is not the poor returns from Goods and Services Tax, as has been widely made out to be, that has messed up the state’s finances. In fact, there is healthy growth in the GST revenue. The crisis the state has found itself in is the consequence of a negative growth in the non-GST component of the state’s tax receipts (the sales tax levied on petroleum products and liquor) consistently over the last four months. Result: an average growth in tax revenues of a pitiable five percent in the last four months; finance minister Dr Thomas Isaac had hoped for a 20 percent growth in the post-GST era.
Though economists are finding it tough to account for the downfall, they are agreed on this: A fall in revenue from the sale of petrol is a sure sign that the economy has fallen into a deep recession. Traditionally, the ratio of the sales tax component to the VAT (now the GST) component in the total tax revenue has been in the 48:52 range. Post August, a dangerous imbalance has crept in; the share of sales tax from petrol and liquor has fallen to between 30 and 35 percent. “The sales tax from petrol and liquor has been what economists call ‘minimum guarantee’ revenue, free of evasion and generally untouched by the shifts in purchasing power,” a top Finance Department official said.
“If it has fallen alarmingly, it can only mean that there is stagnation in the economy,” he added. Again, it is felt that the fall is mainly on account of sales tax from petrol as liquor consumption has kept up ever since the LDF came to power. “What is startling is that the sales tax earning had fallen even in the Onam month of September,” the official said. During October, there was negative growth in revenues.
True, the total GST revenue (the State GST and the Integrated GST from inter-state trade) has not been encouraging. But if the compensation from the Centre that comes every two months is also taken into consideration, the revenue flow has been healthy. Here is the total monthly return from GST: August - Rs 1251 crore; September - Rs 2375 crore (the growth rate was a stupendous 42 percent); October - Rs 1559.64 crore; November - Rs 1776.36 crore (though the growth rate in October was a negative five percent it was more than compensated by a 29 percent growth in Nov.)
It is also to be noted that the state has still not received its full entitlement from its IGST share, which is now kept in the Centre’s kitty and will arrive in parcels in the coming months. However, the gains from GST have been undermined by the fall in the sales tax collection from petrol and liquor. Post August, the growth in this component has been consistently negative, a phenomenon never experienced before.
