Maharashtra, India’s most industrialised state, will have to find new ways to repay debt and interest with the proposed Goods and Services Tax (GST) estimated to dent the state’s own tax revenue by an estimated Rs 20,000 crore in the initial years.
Seven taxes imposed in the state — Value Added Tax, Entertainment Tax, Central Sales Tax, Luxury Tax, Sugar Purchase Tax, Tax on Lotteries, and Octroi (in Mumbai) — will be replaced by the GST, the indirect tax reform ratified recently. These would be in addition to the state’s share in some Central taxes and duties including Central Excise, Additional Excise Duty, Service Tax, Special Additional Duty on Customs, Surcharges, and Cess, which would similarly be subsumed.
In Maharashtra, about 66 per cent of revenue is collected from the state’s own taxes, the highest in the country.
While the Centre is likely to compensate Maharashtra for the lost revenue on goods by increasing the state’s share of taxes on services and by bringing new services under the tax net, the shortfall would still be around Rs 20,000 crore even if the GST’s rate is capped at 18 per cent, sources revealed.
With debt mounting on the state exchequer, the Maharashtra government is hoping that the compensation for lost revenue, and the one per cent additional levy it is likely to be permitted on account of its manufacturing-state status, will fill the shortfall. It is also banking on economic growth promised under the GST regime to increase collection from taxes on incomes in the state.
The Maharashtra Cabinet Monday was given a presentation on GST and its direct and indirect impact on the state. A special one-day session of the state legislature will be convened on August 29 for ratification of GST constitutional bill. With the Congress and the NCP in the Opposition also backing the reform, it is expected to be approved almost unanimously.
The Maharashtra government is also pushing for implementation of a law that would see urban local bodies being directly compensated for loss of revenue under the GST regime. BJP’s ally Shiv Sena has been vociferous about revenue loss to the Mumbai municipality, which it controls, after its biggest revenue earner Octroi is subsumed.
Ordinance route for farm reform
After failing to secure approval of the Legislative Council during the monsoon session for a legislation to allow farmers to sell their produce outside Agriculture Produce Markets, the Maharashtra Cabinet Monday was forced to take the ordinance route for the BJP’s much-publicised farm reform. Similarly, the Cabinet approved ordinances for three other legislations, including the one that bars tainted Cooperative Bank directors from contesting cooperative elections, which could not secure the Legislature’s nod.
Govt job for Olympian Lalita Babar
Following the Cabinet meeting, Chief Minister Devendra Fadnavis and Cabinet colleagues felicitated Satara-based Olympian Lalita Babar for her performance in the 3000-metre steeplechase race in Rio.
Babar made it to the final of the race, securing the tenth position. Fadnavis has offered her a government job.