Revenue Starved Tamil Nadu Government Halts Move To Hike Stamp Duty, State Finances Continue To Be In Peril

The Tamil Nadu government has chosen to withdraw a much-opposed scheme aimed at extracting higher stamp duties from sale of apartments in the state.

The proposed scheme had also made the process of fixing the taxable value of apartments more complex, and subject to the whims of government staff.

The proposal to implement this composite scheme did not come as a surprise to anyone — the state has been reeling under financial difficulties and has continued to lean on the registration department as a major source of income apart from liquor sales-related revenues.

In July, the state government had hiked fees for simple transactions recorded by the registration department. Registering power of attorney, settlement deeds within families were also made expensive — in some cases manifold.

For example, registering a power of attorney would cost Rs 10,000 earlier but has since been hiked to a minimum of one per cent of the property value. Altogether, the cost of 20 such services had been hiked.

The registration department also holds the distinction of being celebrated in the news for ever-growing revenue collections. In October, news reports were put out claiming the department generated Rs 180 crore as revenue to the government in a single day. In financial year (FY) 21-22, the department alone had contributed Rs 14,331 crore to the state's treasury.

The only other department or source of income for the state that contributes in such magnitude is the sale of liquor and its related incomes. Liquor sales too, are, therefore, tracked sometimes on a daily basis and large sales figures are celebrated in news reports. Diwali and other festive time sales numbers are the subject of much discussion.

What drives the state to push for ever higher sales from stamp duties and liquor?

The DMK government, which came to power two years ago on promise of a slew of freebies, has found it hard to run the state without finding more ways to earn revenue for the state. Most of its freebies are ruinous to the state's coffers.

For example, some of the major programmes are the Magalir Urimai Thogai, under which women get Rs 1,000 per month, free travel for women in buses, and free electricity upto 100 units.

The Magalir Urimai Thogai scheme is expected to cost the government Rs 12,000 crore annually and Rs 1,200 crore was allotted to state transport corporations to fund the free travel for women.

And it is not as if the state's financial condition is rosy. The state had an outstanding debt of Rs 7.54 lakh crore as per the budget estimates of 2022-23, which was the highest in the country.

The pressure on the state's finances is only going to increase with the floods in Chennai and southern Tamil Nadu. Chief Minister M K Stalin has sought Rs 7,033 crore as interim relief and Rs 12,659 crore as permanent relief from the central government for the damage caused by cyclone Michaung.

The state's difficulty could be understood from a statement made by DMK MP Kanimozhi, who said that the relief amount could be increased from Rs 6,000, only if the centre granted the amount requested by the state.