As Finance Minister T M Thomas Isaac prepares to present his last full budget this tenure, official figures point to an alarming fall in Kerala's revenue receipts. The finance minister himself admitted in the Assembly on Tuesday that the state was facing a severe liquidity crunch.

Provisional figures released by the comptroller and auditor general shows that at the end of December 2019 only Rs 62,328.34 crore, or 54 per cent, of Rs 1,15,361.22 crore (the estimated revenue for 2019-20) had come into the state's kitty.

Even last fiscal, considered one of the worst in terms of revenue collection, Kerala had managed to pocket 62.5 per cent of its estimated revenue by December.

The biggest shortfall is in the Goods and Services Tax collection. By the end of December, Kerala could collect only 48.29 per cent (Rs 18,166.41 crore) of its target (Rs 37,622 crore) for 2019-20. Last fiscal same time, 76 per cent of the target had come to the state's coffers by the end of December.

Isaac absolved himself of all blame. Instead, he attributes this mostly to the general economic slowdown and a series of corporate-friendly steps that had devastated the finances of the Centre.

Isaac said the huge pay out to the corporates in Nirmala Sitharaman's first Budget last year had squeezed the tax revenues of the Centre. The union finance minister had reduced the corporate tax on companies with a turnover of up to Rs 400 crore to 25 per cent in the Budget presented on July 5, 2019. This had knocked down the effective tax rate on over 99 per cent of companies to 27.8 per cent."Central transfers to the states, as a result, would come down. It would also shrink the share of states in the central tax," he said.

Already, there has been a fall of 1.63 per cent in the Centre's tax devolution to the state. According to Isaac, Kerala’s tax share from the central pool, which was budgeted to be Rs 19,000 crore in 2019-20, would only be Rs 15,236 crore in 2020-21.

As for the grants-in-aid to Kerala, the fall is a whopping 36.18 per cent. The Centre is supposed to devolve Rs 11,702.43 crore as grant-in-aid to Kerala this fiscal. Till the end of December, it had received just Rs 7,925.55 crore.

A cash-strapped Centre has also delayed paying the legally mandated GST compensation to the states. The GST compensation, to make up for a state's fall in annual GST growth below a fixed level (14 per cent for Kerala), is transferred every two months.

"We have not yet received the compensation for October, 2019. Now with December's too not paid, the shortfall is nearly Rs 1,600 crore," Isaac said.

Then, there is what Isaac terms the "arbitrary" cut in Kerala's borrowing limit. During the last quarter of this fiscal (January to March, 2020), Kerala could have borrowed Rs 4,908 crore from the open market. Now, it has been told it could borrow just Rs 1,920 crore.

Still, the finance minister has ruled out any increase in taxes in his coming Budget to achieve fiscal relief. He told the Assembly on Tuesday that he would instead tighten the tax administration and supervision to improve revenues.

Nonetheless, Isaac will probably introduce various non-tax measures to shore up his revenue. Most likely, he would upwardly revise the fair value of land that had not been touched for a decade. He could also increase the tax on land whose value had appreciated as a result of road widening or any major public project.