Maharashtra’s tax arrears have now soared to a staggering Rs 77,136 crore, prompting the state government to step up the process of recovery. The tax arrears are nearly equal to the government’s budgeted development programme for 2017-18 of Rs 77,314 crore, and if realised, would have wiped out the state’s fiscal deficit or the gross annual borrowings, anticipated to touch Rs 46,201 crore by March-end. As per the disclosures by the Maharashtra government in the budget document for 2018-19, arrears accumulated during the past two years alone stood at Rs 7,517 crore, while recover of another Rs 13,652 crore in taxes raised has been pending for more than a decade.
Statistics further reveal that about 74 per cent of the amount in arrears (Rs 55,339 crore) was locked in dispute. Incidentally, sales tax/VAT- which has now almost entirely been subsumed in the GST – accounts for Rs 57,199 crore of the total outstanding.
In March 2017, while presenting the government’s spend plan for 2017-18, Finance Minister Sudhir Mungantiwar had announced a road map for beefing up the recovery of these arrears before the GST roll out. He had asked sales tax officials to expedite appeal disposals in cases where the amounts were locked in dispute. “The number of appeals filed by dealers under the Value Added Tax is significant,” Mungantiwar had said, while vesting additional powers with the government to write off interest and penalties in certain cases. The government had also set up three more tribunal for speedy appeal disposal.
Further, adopting a “carrot” approach, the government had increased the time limit for filing appeals, and the power to remand back ex-parte assessment orders issued by the assessing officer was also provided to the appellate authority.
While the approach met with some success too, the problem was another Rs 6,100 crore got accumulated in sales tax arrears over the past year.
With the advent of the GST, senior government sources admitted that these arrears in sales tax were a massive black hole for the state. For 2018-19, the Finance Minister has again emphasised “on the need to mobilise additional resources through the recovery of pending tax collections” as part of his tax policy for the year. “It is also hoped to recover pending taxes through an Amnesty Scheme,” the budget document states.
While proposing some changes in rules to expedite recoveries, the government has taken recourse to the “stick” approach this time around. It has taken away a dealers power to file an appeal against selection of a case for tax assessment. “To implement GST effectively, it is necessary to complete the VAT work expeditiously,” states the budget document.
The Central Sales Tax has pending tax recoveries totalling Rs 16027 crore, whereas taxes raised but not realised stood at Rs 1,044 crore for land revenue, Rs 1,013 crore for premiums and royalties of extractions of minor minerals, and Rs 588 crore for electricity duties. The total outstanding in the case of non-tax arrears, meanwhile, stood at Rs 3,116 crore.