The contribution of State’s own tax revenue (SOTR) to Tamil Nadu’s overall tax revenue has been stable at over 70%, according to data shared in the Reserve Bank of India’s report titled ‘State Finances: A Study of Budgets of 2023-24’.
As per data, SOTR accounted for 78.8% of Tamil Nadu’s total tax revenue during the pre-GST period of 2015-16 to 2016-17. During the post-GST and pre-COVID period of 2018-19-2019-20, the share of SOTR stood at 79.1%. Post-COVID, the SOTR share was 78.9%, it said.
There was a large spatial variation in SOTR, ranging from more than 70% of total tax revenue in Haryana, Maharashtra, Telangana, Tamil Nadu, Gujarat, Karnataka, Kerala and Punjab to less than 50% in Bihar and Jharkhand, the RBI said. Uttar Pradesh share of SOTR ranged from 45.6%-54%, while that of Madhya Pradesh it was around 50-51%.
Till 2016-17, sales tax/VAT was the largest component of own tax revenue. From 2017-18, however, State Goods and Services Tax (SGST) emerged as the most important source, followed by sales tax/VAT, excise duty, stamp duty and registration fees and taxes on vehicles, it added. In the post-GST period, there had been a general increase in the share of SOTR, which helped the States to reduce their dependence on devolution from the Centre, the RBI noted.
SGST collection has picked up since 2021-22 benefitting from the revival in economic activity and increased compliance due to improved tax administration, especially among the larger States, it added.
Revision of excise duty on Indian made foreign spirit brands and beer brands, revision of license fee, application fee, privilege fee in several areas of liquor industry were among the tax reforms undertaken by Tamil Nadu, RBI listed in its report.
In an interview with The Hindu in September, Finance Minister Thangam Thennarasu said the State focused on rationalisation of rates, formulation of amnesty schemes, improvement in collection efficiency and technological measures such as end-to-end computerisation among others to augment SOTR.
In his first episode of the ‘Speaking for India’ podcast series, DMK president and Tamil Nadu Chief Minister M.K. Stalin pointed out that from 2014, till last year, the tax paid by Tamil Nadu to the Indian government was ₹5, 16,000 cr. But in return, what the State got was ₹2,08,000 cr., he said.
In the 12th Finance Commission, the allocation of funds to Tamil Nadu was 5.305%. However, in the 15th Finance Commission, it was reduced to 4.079%, Mr. Stalin pointed out and said the amount of money that Tamil Nadu lost every year “isn’t negligible”.
