A buoyant economy, stabilisation of value-added tax revenue and all-round growth in taxes will contribute to a 26 per cent rise in Tamil Nadu's own tax revenues in the current year compared with last year.

Tax revenue contributes about 95 per cent of the State's income. Revised estimate of tax revenue is 20 per cent higher than the Rs 41,438 crore pegged in budget estimate.

The Finance Minister, Mr K. Anbazhagan, presented the interim Budget for 2011-12, the last Budget for the present Government that took over in 2006. There are no new tax proposals, a feature that has characterised this regime's annual budgets while State revenues have more than doubled.

Manufacturing sector

Manufacturing sector has grown at an average rate of 8.4 per cent between 2006-07 and 2009-10. During the current year up to August, the growth rate was 12 per cent. During the five-year period, industrial investment was about Rs 52,195 crore with Rs 1,377 crore provided as tax concessions.

According to the Finance Secretary, Mr K. Shanmugam, VAT revenues have stabilised contributing to the significant growth in State taxes aided by the buoyant economy. Tamil Nadu has been through a two-year transition phase following the shift to VAT in 2007 from the general sales tax regime previously.

As of December 2010, State revenue was about Rs 33,558 crore, including VAT of Rs 21,008 crore; State Excise Rs 6,086 crore, Stamp Duty and Registration Rs 3,246 crore and Motor Vehicle Tax Rs 1,949 crore.

Other factors that have contributed to the growth include petroleum revenue and the growth in economy driven by the manufacturing and services sector. This will contribute to the major chunk of State's own tax revenues which is expected to grow by about 26 per cent over the last year to reach Rs 49,125 crore.

This will also help the State Government present a surplus Budget next year taking into account the possible savings in expenditure when some of the major schemes are completed such as the free distribution of colour TVs and the full pay out of Pay Commission arrears during the current year, he said. Revenue receipts have been pegged at Rs 72,413.82 crore (Budget Estimate Rs 63091.74 crore) with expenditure met from revenue Rs 66,488.19 crore (BE 75,542.61 crore) leaving a Revenue Deficit of Rs 3,128.79 crore (BE Rs 3,396.45 crore).

Budget Estimates for 2011-12 peg Revenue Receipts at Rs 79,413.26 crore; Revenue Expenditure at Rs 78,974 crore and a Revenue Surplus of Rs 438.78 crore.