Tamil Nadu’s own-tax effort has ‘collapsed’, says White Paper

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Tamil Nadu Finance Minister N. Marie Wilson and Additional Chief Secretary to the Government of Finance M.A. Siddique during the release of a White Paper on the Fiscal Management of Tamil Nadu in Chennai on June 16, 2026. | Photo Credit: ANI

The White Paper presented by Finance Minister N. Marie Wilson on Tuesday said “the State’s own-tax effort has collapsed”.

Giving an account of how the State’s Own Tax Revenue (SOTR) fared in the last five years vis-à-vis three “peer States” (Maharashtra, Gujarat, and Karnataka), the White Paper stated that the SOTR marked “the biggest component which is most directly within the State’s control and the most reliable indicator of fiscal effort”.

The State’s “own-tax revenue is drawn from five principal sources”, which pertained to commercial taxes (Goods and Services Tax), Value Added Tax (VAT) on petroleum, State Excise and VAT on liquor, Stamps & Registration, Motor Vehicle Tax, and other taxes.

Within the broader commercial taxes, GST accounted for around 53%; VAT on liquor, 28%; and VAT on petroleum products, 19%. “[Revenue from] Commercial taxes, as a proportion of GSDP (Gross State Domestic Product), have declined from approximately 4.53% in 2021-22 to approximately 3.89% in 2025-26 — a decline that was not seen in the case of peer States,” the document said.

Pointing out that the Total Revenue Receipts (TRR) fell from about 10% of GSDP in 2021-22, the start of the post-COVID window, to 8.32% during 2025-26, the official document stated that the SOTR-to-GSDP ratio declined from 5.93% to 5.45%, the “lowest in the State’s history and the steepest decline” among the benchmarked States. But in 2006-07, SOTR, as a percentage of GSDP, had a peak of 8.94%. The cumulative decline from the historical peak meant approximately ₹1.23 lakh crore in annual revenue had been foregone — around 90% of the provisional fiscal deficit for 2025-26.

“The decline is spread across all major tax heads — GST, VAT on petroleum, State Excise, Stamp Duty and Mot