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The government of Tamil Nadu presented a Budget for 2015-16 with no new taxes and a cut in some existing levies.
Ahead of a 'Global Investors' Meet', the state administration has also announced various measures for making it easier to do business.
O Panneerselvam, in his first Budget speech as chief minister, said he was providing certain concessions to boost the manufacturing sector.
The earlier input tax credit reversal of three per cent on inter-state sale of goods is being withdrawn, to make manufacturing industries more competitive with counterparts in neighbouring states. This was welcomed by the Madras Chamber of Commerce.
Panneerselvam, also the finance minister, said works contracts relating to sizing of yarn would be exempt from value added tax (VAT). Also, the VAT on cardamom will be reduced from the present levy five per cent to two per cent, on LED lamps of all kinds and mobile phones from the present 14.5 per cent to five per cent. Electricity tax was withdrawn on generating plants using biomass. The tax concessions would mean an annual loss of Rs 650 crore, said the CM. There would be no new taxes and the effort would be to improving the levy administration and tightening the collection system, he said.
The government estimates the revenue deficit for 2015-16 at Rs 4,616 crore, with revenue receipts projected at Rs 142,681 crore and revenue expenditure at Rs 147,297 crore. The CM said a revenue deficit was inevitable, with increased subsidies, slow tax growth and allocations to social sectors.
The fiscal deficit will remain at 2.89 per cent of Gross State Domestic Product (GSDP), below the recommended cap of three per cent. The Debt-GSDP ratio will be 19.23 per cent, below the recommend cap of 25 per cent.
Projecting a capital expenditure of Rs 27,213 crore, the fiscal deficit is estimated at Rs 31,829 crore. The major revenue streams are commercial taxes (Rs 72,068 crore), state excise (Rs 7,297 crore) and motor vehicles tax (Rs 4,883 crore). Tax revenue is expected to rise 12 per cent over 2014-15.
Panneerselvam said the share of central taxes is projected at Rs 21,150 crore. Grants-in-aid from the central government will be Rs 16,377 crore. Net borrowing would be raised to Rs 30,447 crore against the permissible level of Rs 32,990 crore.
The total debt liability by the end of the financial year is estimated at Rs 211,483 crore.
An industry investment portal, as a single-window mechanism for obtaining all the requisite licences and permissions from various departments, will be launched in the coming financial year. The rules for commencing new ventures will be made simpler and more transparent, and to track applications for monitoring their disposal within a stipulated schedule.
Panneerselvam said drought in previous years and a general slowing in the economy had hit tax realisation. Expenditure had been kept in check but the less than anticipated tax collection and cut in the share of central taxes had affected the revenue account.
The benefit of increased shares for states in the vertical devolution of central taxes from 2015-2016 onwards has been nullified due to the reduction in the horizontal share of Tamil Nadu among the states, recommended by the 14th Finance Commission, he said.
The proposed change in sharing for centrally sponsored schemes would further strain the finances. However, the overall fiscal deficit, net borrowings and debt-GSDP ratio would be kept within the permissible limits. The government has been taking all necessary steps to put the economy back on track, he said.
