Kerala Budget: Why Isaac is no different from Nirmala Sitharaman

Why Isaac is no different from Nirmala Sitharaman

The early part of finance minister T M Thomas Isaac's budget speech was a rant against his national counterpart Nirmala Sitharaman's tight-fisted ways.

But when it comes to budget figures both Isaac and Nirmala are on the same page. To put it mildly, both have put out optimistic numbers. Niramala Sitharaman, for instance, had said the country's tax revenue would grow by 12 per cent. Even Isaac had a good laugh because the revised tax growth figures for the ongoing fiscal was just 4 per cent. Isaac had also sneered at the mammoth disinvestment figures put out by the Union minister.

Isaac's fancy numbers


Now, get a closer look at Isaac's tax figures. He has estimated a tax revenue growth of 21 per cent during 2020-21. Remember, in his last budget speech Isaac had predicted a wildly optimistic GST growth of 30 per cent. His revised figures say he could not even manage 10 per cent; it was only 9.9 per cent. Isaac said there was a fall of more than Rs 10,000 crore from what he had estimated from tax collections.

Even this could be a relatively small figure. The latest figures put out by the Comptroller and Accountant General (CAG) show that till the end of December, 2019, the growth in Kerala's tax revenue was below 2 per cent. The drop could be more than Rs 15,000 crore.

Now, Isaac predicts the growth would be 21 per cent during the next fiscal. Such commendable growth in tax revenues was seen only during the 2011-12 period when the economy was in the pink of health. After that, tax collections had shown a downward slide. But finance ministers are die-hard optimists.

No more reason to complain

If Isaac could get away with not meeting targets, it was only because he had a punching bag: the Centre. His biggest grouse was that the Centre had kept pushing the last date to file tax returns. This, Isaac said, had allowed traders to evade tax in a big way. “Only if I scrutinise the tax returns can I detect false input credit claims, evasion and suppression. As long as there is no scrutiny the unscrupulous will go on evading,” was Isaac's constant refrain.

Now he has no reason to complain. Traders have all submitted their returns by the end of this January. This could also be why he expects a higher tax growth.

Taxman's comfort zone

A certain lethargy had also crept in. The GST Act had assured Kerala a tax growth of 14 per cent. If the tax collections fell below this mark during the first five years of the GST rollout, it was written down that the Centre would compensate. In other words, even if our taxmen snored right through the fiscal, Kerala could still achieve a growth of 14 per cent. Isaac himself was not too keen on going ahead with his amnesty schemes as he was assured of a 14 per cent growth.

This risk-free existence was shattered when the Centre started to delay the GST compensation. There is also a fear that the Centre would even refuse to pay the balance amount. Shaken, Isaac has declared through the budget that Kerala would no more be dependent on compensation.

If tax collection does not improve again Isaac will have only himself to blame. The Economic Review 2019 had noted that industrial production had picked dramatically in Kerala. Over a lakh jobs have been created in the past three years. Isaac will have to ensure that a share of the gains gets transferred to the state's kitty.

Tax discipline

Why Isaac is no different from Nirmala Sitharaman

Under the GST regime, a finance minister cannot play with tax rates. He can only tighten things. Here are some things Isaac says he would do to lift Kerala out of the Centre's dependency.

One, 75 per cent of tax officials will be deployed exclusively for GST collection. Two, tax net would be widened to include up to 1 lakh new registrations.

Three, the annual returns for 2017-18, 2018-19 will be subjected to scrutiny to detect evasion and other fraud. Four, the data received from GST information system will be analysed using various data analytic methods to spot areas of evasion.

Five, cameras will be installed at border points to verify the e-way bills of vehicles carrying goods from other states and prevent smuggling. Six, assistant state tax officers will be specially entrusted to watch proper filing of returns and payment of tax. They will continuously interact with the defaulters over phone, visit their business places, clear the doubts and their responses will be updated through mobile apps.

Seven, E-invoice will be made compulsory for evasion prone goods and services.

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