The state’s tax revenues have dried up as demonetisation of high-value banknotes appears to have majorly impacted output and consumption. The state’s tax revenue fell a good Rs 4,903 crore short of the target. While the government had expected to collect Rs 1,75,849 crore through various tax revenues, the budget document revised the estimate to Rs 1,70,945 crore.
The worst hit was the collection from stamps and registrations fee on property transactions, dropping by Rs 3,548 crore to Rs 20,000 crore. Construction and the property buying market was among the worst-hit following demonetisation.
Revenues from the state’s excise duty on liquor sales declined from the estimated Rs 15,343 crore to Rs 13,600 crore — a Rs 1,743 crore shortfall. While the government had planned to bring in another Rs 3,200 crore through land revenue at the start of the year, this did not materialise fully and the government ended up raising just Rs 1,501 crore.
While the state had planned to raise Rs 6,067 crore through sale of additional floor space index (FSI) in construction projects, the slump saw only Rs 1,774 crore being realised. The state share of revenues in Union Customs collections also declined.
In fact, it was a bail-out in the form of grant-in-aid from the Centre that came to the government’s rescue. The Centre released 29 per cent – Rs 32,447 crore against the targetted Rs 24,964 crore- more grants to the state for centrally sponsored schemes.
The Union Excise duty and Service tax collections also overshot their target. On the expenditure side, the non-productive expenditure shot up by Rs 7,280 crore in a year when elections to local bodies were held .
A major share of the enhanced expenditure went towards subsidies, increased interest payments on loans, and enhances salary bills of various departments.
The capital expenditure, meanwhile, dropped from the budgeted target Rs 31,005 crore to Rs 30,409 crore. Incidentally, the government has again projected to raise Rs 6,067 crore from sale of FSI in 2017-18. The state’s fiscal managers said they expected the market activity to pick up with the advent of the Goods and Services Tax, but industry experts remained skeptical.