Govt fails to achieve revenue targets - State’s income shows a growth of just 9.8% till July against the targeted 16%

Monday, 20/10/2014

http://www.tribuneindia.com/2014/20141020/punjab.htm#3

Chandigarh : Punjab’s poor fiscal health, considering the high overdraft and the state’s inability to clear pending bills worth hundreds of crores, seems to have been caused by the slow growth in the state’s own tax revenue. As such, the government is going in for an austerity drive to keep its expenses under control.

The revenue expenditure till July this year is Rs 11,065.57 crore while the revenue receipts are Rs 10,018.83 crore. The revenue expenditure is up by 9.09 per cent over last year, which means deficit till July is Rs 611.21 crore.

The state’s own tax revenue, earned through imposition of sales tax/value added tax, excise collections, stamp duty, tax on vehicles, electricity duty, entertainment tax, etc, has shown a growth of just 9.8 per cent, against a targeted growth of 16 per cent.

This year, Punjab expects to earn Rs 28,480 crore as its own tax revenue. Till the month of July (audited figures are till July), the state earned Rs 8,311.50 crore as its own tax revenue (rise of 9.8 per cent). Sources say the growth in VAT is 11.92 per cent (Rs 5,498.45 crore as against Rs 4,912.65 crore last year), though the government had targeted a growth of 15 per cent.

The excise collections have seen a 12 per cent increase in revenue from Rs 1,285 crore till July last year to Rs 1,440 crore till July this year.

The taxes on vehicles (up by 14.52 per cent), land revenue (up by 13.25 per cent) and entertainment tax (up by 11.25 per cent) have shown a good increase, but the sharp decline in electricity duty has added to the decline in the state’s revenue growth trajectory. The electricity duty in the state is down by 51.77 per cent, from Rs 7.63 crore till July last year to Rs 3.68 crore till July this year.

On an average each month, the state faces a revenue deficit of around Rs 500 crore to Rs 600 crore. This year, Punjab was hoping to bridge the gap in revenue collections through a higher revenue receipts, relying mainly on increase in its own tax revenues.

But with the economic slowdown hitting VAT collections and slump in real estate pulling down the stamp duty collections (which are down by almost six per cent —- Rs 877.15 crore against Rs 930.39 crore), it seems the revenue deficit will not be bridged.

The state also has a liability of Rs 1,500 crore on its head, which has to be cleared when employees who were given a two-year extension retire. This could mean the state’s revenue deficit would be higher than the projected Rs 4,252.63 crore. It is thus that the state has already borrowed Rs 5,283.92 crore (gross borrowing), of which Rs 2,060.14 crore is net borrowing.

The good news is that the state’s own non-tax revenue has shown an increase of over 50 per cent till July — Rs 688.89 crore as against Rs 456.86 crore last year.