THIRUVANANTHAPURAM: Demonetisation seems to have had the effect of a deadly and persistent chemical warfare agent dropped on the state's fiscal scene. It has choked consumption, the enzyme that catalyses economic growth in the state. Growth in the state's revenues has gone negative. For the first time in decades, VAT has shown a negative growth of 7 percent. According to Finance Department figures updated till December 15, negative growth is being witnessed across the board during the first half of December, in motor vehicles tax, registration fee, and even sales tax. "It can only get worse as the month matures," a top Finance Department source said.
The fall looks calamitous. Till November 30, the growth in VAT was an encouraging 14 percent. "The taxes for the month of November are submitted only during December, according to a timetable fixed by the Commercial Sales Tax Department. It is the companies with lesser turnover that submits in the early days and already the growth in collection is negative. It is as if the economy has withered right in front of us, like it has been poisoned. We shudder to think what will happen when the big fishes submit their tax returns," the official said.
Till Prime Minister Narendra Modi announced the demonetisation drive, it looked like finance minister Dr T M Thomas Isaac was engineering a turnaround of the economy. The growth in tax revenue during October had shot up to 17 percent from a mere 9 percent during August and September. Growth was worse during June and July, falling as low as 3 percent in July. The 14 percent growth in November, though not as high as in October, still managed to sustain the upward trend, and was higher than at any time during the previous UDF regime. During October, the monthly VAT collection was Rs 3,208 crore, in November Rs 2,754.32 crore. Finance Department fears that it would fall below Rs 2,000 crore in December.
