Lockdown effect: Haryana’s economy to take a hit

A buoyancy in tax revenue collections projected by Haryana chief minister, Manohar Lal Khattar, when he presented the 2020-21 budget estimates barely a month ago, is in for an anti-climax due to the ongoing lockdown to check the spread of coronavirus.

Tax officials said the extent of revenue loss will depend on how long the lockdown continues. “Revenue collection will take a severe hit if the lockdown gets extended. We have not made any on paper projections so far. However, things are bad,” said a top excise and taxation official on condition of anonymity.

The BJP-JJP regime had painted a rather rosy picture of the expected tax collections in its 2020-21 budget estimates. The forecast of ₹60,580 tax revenue receipts made in the budget document entailed collection of ₹22,350 crore will be collected from Goods and Service Tax (GST), ₹10,702 crore from the value added tax (VAT), ₹7,500 crore from the excise (liquor business), ₹7,500 crore from stamps and registration and ₹3,615 crore from tax on vehicles.

However, taxation analysts say that due to the lockdown the state government has already lost about ₹2,000 crore on account of the GST and ₹1,000 crore on account of excise revenue. The total hit to revenue collections could be in the range of ₹5,000 crore, they said.

“The supply chains have been affected, ancillaries will take a long time to revive, the shutting down of micro medium and small scale enterprises will add to the fiscal woes,” an official said.

A taxation official, who did not wish to be named, said it will be quite a task to revive the market demand after the lockdown period gets over. “The purchasing power will get adversely affected and inflation will be high. Also, people will spend primarily on essential items even after the lockdown period gets over. Sales of fast moving consumer goods (FMCGs), automobiles including two wheelers will suffer a big setback,’’ he said.

Excise and taxation officials said the Union government has indicated that the state governments are unlikely to be fully compensated for the revenue shortfall from the Goods and Services Tax. The compensation is given by the central government to the states from the proceeds of a compensation cess levied on certain items. “

In the last two financial years, the state government got around ₹1,500-2,000 crore as compensation cess. There is uncertainty over this compensation now,” the official said.

The expected revenue expenditure in 2020-21 budget estimates has been pegged at ₹1,05,338 crore, approximately ₹13,000 crore higher as compared to the revised estimates for 2019-20 financial year which ended on Tuesday.

The revenue deficit for 2020-21 financial year is also expected to go up to ₹15,373 crore, about 1.64 % of the gross state domestic product (GSDP). In 2019-20 fiscal revised estimates, it was around ₹14,675 crore, 1.76 % of the GSDP.

An additional burden on the exchequer will be in form of financial support of ₹1,000 crore given from the budget for mitigating the hardship of economically weaker sections on account of the lockdown.

“ The state government will have to recalibrate its expenditure, bring in austerity, and curtail spending to tide over the expected fiscal crisis,’’ a finance official said.