Tamil Nadu has recorded the lowest GST revenue growth among industrial states in the last financial year. Data released by the GST website shows the state’s growth at 5.48%, was significantly lower than the national average of 7.17%. GST revenue includes central GST, state GST, inter-state GST and cess. Tamil Nadu’s total GST revenue in 2019-20 was Rs 74,430.43 crore, compared to Rs 70,562.21 crore in 2018-19.
Experts say the reason for the poor performance is slowdown of its biggest sector – manufacturing. “Overall there had been a slowdown in the country during 2019-20 and Tamil Nadu was not an exception. Being a manufacturing state, the GST growth is likely to be lower compared to previous year due to the lower growth of GSDP,” said New Delhi-based professor N R Bhanumurthy of National Institute of Public Finance & Policy. Last year the automobile industry, with its hub in TN, had seen a setback in demand and many firms had been forced to scale down production.
The poor numbers, therefore, were not unexpected. Deputy chief minister O Panneerselvam in his budget speech on February 14 had said the growth in 2019-20 is 7.27% against 8.17% in the previous year. “Global and national level economic headwinds are faced by Tamil Nadu as well, at this time. But TN has withstood these fierce headwinds and we expect a stronger growth performance in 2020-21,” said Panneerselvam.
In states like Maharashtra and Andhra Pradesh, pharmaceuticals, agriculture and IT sectors pulled up the numbers. But in TN, lack of such diversity of industries affected the state’s growth, say experts. Sources in the finance department told TOI that the slowdown hit Tamil Nadu more due to the presence of manufacturing companies. “Tamil Nadu which is an automobile hub has been hit badly after the slowdown began. This is one of the main reasons for the GST growth being low in Tamil Nadu,” said Madras School of Economic director K R Shanmugam.
Changing GST council rates, and taxes on products compounded the issue as small traders and manufacturers could not properly file their GST. “There are some unsettled issues in Tamil Nadu which are also affecting the GST collection. Issues with filing of GST returns have not yet been solved,” said Shanmugam. He said when GST was launched it was expected that the tax revenue growth in Tamil Nadu will be 14% each year. But looking at the growth in 2019-20, the state has a long way to go.