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Centre cuts Maharashtra’s tax transfers by 30%

According to the latest revised estimates for tax devolution to states in 2020-21, Maharashtra will now get Rs 33,742 crore as its share from the divisible pool in the ongoing fiscal, which is Rs 14,758 crore lower than the originally budgeted amount of Rs 48,500 crore.

Written by Sandeep A Ashar | Mumbai |
February 3, 2021 3:41:05 am
Maharashtra’s tax transfers, Union budget, Maharashtra tax devolution, Mumbai news, Maharashtra news, Indian express newsThe revised tax devolution estimates for states were released as part of the Union Finance Minister Nirmala Sitharaman’s Budget documents.

In a major setback to Maharashtra’s income target for the ongoing fiscal, the Centre has cut tax transfers to the state by more than 30 per cent over the budgeted estimates.

According to the latest revised estimates for tax devolution to states in 2020-21, Maharashtra will now get Rs 33,742 crore as its share from the divisible pool in the ongoing fiscal, which is Rs 14,758 crore lower than the originally budgeted amount of Rs 48,500 crore.

With less than two months to go until the end of the financial year, Maharashtra, the worst hit state by the pandemic, is still way behind its income target for 2020-21. Sources said the Centre’s slashing of the central tax transfers has only worsened the situation further. The revised tax devolution estimates for states were released as part of the Union Finance Minister Nirmala Sitharaman’s Budget documents.

The overall decline in tax revenue growth has impacted the devolution. With the Fifteenth Finance Commissioner also slashing the state’s share in the divisible pool by one per cent from the next fiscal onwards, Maharashtra’s share from the divisible pool in 2021-22 will also be far lower than the budgeted estimates for 2020-21. It is estimated at Rs 42,043 crore.

Maharashtra is also evaluating the impact of the Centre’s decision to impose an Agriculture Infrastructure and Development Cess on alcoholic beverages, petrol and diesel. Consequent to the imposition of the cess, the Centre has announced reduction in rates of basic excise duty and special additional excise duty on the petroleum products so that the consumer does not bear any additional burden. While the Centre has shielded the end user, state’s fiscal managers are of the opinion that the state’s share of income from these sources will go down. “We are evaluating the extent of the loss of revenue,” a source said. Reflecting the tepid recovery of the economy, Maharashtra, India’s most industrialised state, has managed to collect revenue of Rs 1,88,765 crore in income between April 1, 2020 and January 31, 2020. This is still 46 per cent lower than the Rs 3,47,457 crore it had projected to earn in 2020-21.

By January end in 2020, the state had reported earnings totalling Rs 2,36, 827 crore, which is 25 per cent higher than the collections so far in 2020-21.

While there has been an upswing in collections from major taxes, including GST, excise, stamps and registrations, in the third quarter with more reopenings and economic revival measures being announced, officials admitted that this year’s earnings are nowhere near last year’s collections or the budgeted estimates for 2020-21, and admitted that the state is bracing for a huge budget hole.

Statistics indicate that the state’s tax revenue is 47 per cent below its estimated target and remains a major cause of worry. Just before the pandemic struck the state, it had estimated earnings of Rs 2,25,071 crore from taxable sources. But by January end, it had barely collected Rs 1,20,698 crore. Collections from non-tax levies were faring even worse. Till January 31, the government has managed to collect only Rs 9,698 crore in non-taxable revenue, which is only 47 per cent of its targeted revenue of Rs 20,506 crore. Worsening matters further, the state’s income from grant-in-aid from the Centre and central taxes is 38 per cent and 48 per cent lower than its estimated target. With the coronavirus caseload now seemingly under control, the state has taken some steps to rev up the economy, but senior officials said the economy will continue to be sluggish for a while.

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