COVID-19 surge may hit Tamil Nadu’s revenue

It is too early to gauge the intensity of the third wave, says senior official

With the start of the third wave of COVID-19 pandemic, the State government faces the prospect of its revenue taking a hit.

However, it is too early to gauge the intensity of the impact, a senior official says. But what could come as a saving grace is the forecast of health experts that the intensity of the third wave may not be as strong as the second. If this turns out to be true, the State government can absorb the pandemic’s adverse impact on the revenue.

The government’s general approach has been to balance the requirements of public health and livelihood issues of people. At present, the government has only resorted to minimum restrictions. But the experience of the first and second wave of the pandemic shows that there is a possibility of stringent restrictions coming into force if the current surge in the number of daily new cases gathers momentum. In such a scenario, the revenue will take a hit, as in the previous rounds of two waves. Capturing this aspect, an official document on the mid-year review of trends in receipts and expenditure, placed in the Assembly recently, cited adverse impact of the pandemic on tax collectons as one of the reasons for the deviation from the RBE [revised budget estimates] in the trend in receipts for the first six months (April to September) of 2021-22.

For most part of this financial year, the State’s Own Tax Revenue (SOTR) had grown impressively over the collections recorded in the previous year. In the first half of 2021-22, SOTR registered a growth of about 38% over what it was during the corresponding period in 2020-21. However, it was learnt that there was a dip in the revenue during December as compared to the situation a year ago.

Major contributors

Two components of SOTR — stamps and registration fees and taxes on vehicles — had recorded growth of around 74% and 69% respectively. They accounted for ₹8,767 crore out of the SOTR of ₹52,908 crore. Commercial Taxes, one of the remaining three components, fetched a revenue of ₹40,508 crore, a rise of around 35% over the previous year’s figure. State Excise witnessed a modest growth of around 9.6% with the collections of ₹3,496 crore. The State’s Own Non Tax Revenue too saw a growth rate which was approximately 21% over the previous year’s collections. Till the end of September, this source of revenue contributed ₹3,974 crore, according to the document.

In the first half of this year, the State received ₹10,611 crore of its share of Central taxes, constituting 39.09% of RBE, and grants-in-aid of ₹ 17,717 crore from the Centre, representing 51.26% of the estimated receipts. The document pointed out that during the same period in 2020-21, the State got ₹15,973 crore as grants-in-aid from the Centre. This meant that the State got ₹1,744 crore more this time than in the past.

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