Finance Minister K N Balagopal is perennially agitated by the wrongs done to him, but seems blind to his own failings.
He is furious that the BJP-led Centre has slashed Kerala's open market borrowings by a whopping Rs 24,638 crore in 2022-23. While lamenting about the money the Centre has supposedly held back, is Balagopal aware of the amount his administration has left uncollected?
A conservative estimate provided by sources in the Finance Department show that the uncollected revenue that had piled up till 2021-22 fiscal was Rs 35,000 crore.
An official figure for revenue arrears is available only till 2019. On March 31, 2019, it was Rs 20,146.39 crore. In 2018, it was Rs 14,904 crore. In 2017, Rs 12,591 crore.
This reveals a disturbing growth in revenue arrears. Between 2017 and 2018, 18.4 per cent. Between 2018 and 2019, 35 per cent. Before the first Pinarayi Vijayan ministry came to power in 2016, the growth in arrears was below 10 per cent.
By 2019, the growth in uncollected revenue crossed 35 per cent. The top Finance Department source arrived at the arrears for 2022-23 by assuming a conservative annual increase of 20 per cent.
Based on this assumption, by March 31, 2020, the arrears swelled to Rs 24,175 crore. By the end of March 2021, it was Rs 29,010 crore. And by the end of March 2022, it was Rs 34,812 crore. "Probably, the real amount would be somewhere close to Rs 40,000 crore," the official said.
GST's judiciary hurdle
Predictably, the Goods and Services Tax Department is the worst performer when it comes to collection of dues. In 2019, the latest year for which figures are available, the GST Department has left Rs 13,305.88 crore uncollected. This was 66 per cent of total revenue arrears of Rs 20,146.39 crore accumulated till March 31, 2019.
A top GST Department source attributed the fall in revenue collection to stay of proceedings by various authorities like courts, the shutting down of businesses and insolvent dealers. Over 35 per cent of the amount (Rs 4,669.99 crore) is under stay by various courts. Nearly 22 per cent (Rs 2,898.12 crore) of the total arrears in GST collection is the amount of tax evasion detected and the penalty imposed on them.
By 2019 March, there were nearly 70,000 tax evasions cases worth Rs 2,898.12 crore pending in courts. The Comptroller and Auditor General has repeatedly noted that departments, especially the GST Department, have failed to provide reasons for court cases dragging on endlessly.
Eventually, KIIFB's loss
The next big fall in collection has been recorded in the Motor Vehicle Tax Department, the revenue Kerala Infrastructure Investment Fund Board (KIIFB) depends on; half the annual collection is transferred to KIIFB's account.
The shortfall in revenue collection on March 31, 2019, was Rs 2,457.16 crore, nearly 13 per cent of the total arrears of Rs 20,146.39 crore.
Official figures furnished by the Motor Vehicles Department show that dues from KSRTC make up 73.12 per cent of the total shortfall. On March 31, 2019, the KSRTC failed to pay Rs 1,796.75 crore as tax to the MVD. Sources said the amount has increased over the years.
Power failure and stamp of disapproval
There has also been a fall in the collection of electricity taxes and duties, a major source of government's tax revenue. By March 2019, the uncollected amount was Rs 1,486.50 crore.
Government and its agencies are the major defaulters, accounting for 98.93 per cent of the shortfall in electricity duties; an amount of Rs 1,461.37 crore was due from state public sector undertakings, Rs 9.21 crore from local bodies, Rs 0.03 crore from central public sector undertakings, Rs 0.01 crore from other State Governments. Individuals, private firms, and private companies owed the government Rs 15.87 crore.
By the end of March 2019, there was also a failure to collect Rs 1,402 crore by way of stamps and registration fees. Stamps and registration, which relates to property deals, is Kerala's biggest revenue earner after GST and sales tax. It is a bigger source of income than even excise and motor vehicles. During 2018-19, the revenue from Stamps and Registration was Rs 3,693.17 crore.
Exemption for liquor barons
The Excise Department had failed to collect Rs 258.80 crore by March 2019. Department sources heap the blame on court stays. However, official figures available for 2019 show that only Rs 57.32 crore (22.15 per cent) out of a total 'abkari' dues of Rs 258.80 crore was caught up in court cases. Meaning, the Department is too lenient on liquor contractors. Most of the 'abkari' dues are pending from individuals, private firms and companies.
In fact, virtually all of the arrears (Rs 255 crore) had been pending for more than five years.
Free teak, free protection
The Forest Department, the second big non-tax revenue earner after lotteries, had failed to collect Rs 407.12 crore. The Forest Department's revenue comes mainly from the sale of timber, teak stumps, lease rent, penal interest, centage charges and the like. The major share of arrears, nearly 97 per cent, is due from Government/Government bodies.
But here is a statistic that would indicate why collecting revenue is one of the Forest Department's least priorities: More than 65 per cent of the total arrears in 2019, nearly Rs 265 crore, had been pending for more than five years.
The Police Department is also finding it hard to collect its non-tax dues. It had failed to mobilise Rs 250 crore that should have ideally come its way. The Police Department's revenue comes mainly from the protection services it offers central and state government utilities.
The major defaulters are Southern Railway and KSEB whose arrears added up to Rs 1,46.31 crore, or 58.66 per cent of the uncollected amount, by the end of the 2018-19 fiscal.