No GST in sight, Maharashtra may take a Rs 7,000-crore hit in 2016-17

maharashtra.jpg

The plan was to introduce GST from April 1, 2016. For this, the state had been pushing the Centre to put in place a special mechanism to compensate large manufacturing states for five years in the first phase of the GST.

Maharashtra may have to brace for a Rs 7,000-crore hit in 2016-17 with no clear indication on implementation of the Goods and Services Tax (GST) regime. When the state abolished the Local Body Tax (LBT) in October 2015, it led to a loss of Rs 7,000 crore for the exchequer. The government had hoped the loss would be recouped once the GST kicked in.

The plan was to introduce GST from April 1, 2016. For this, the state had been pushing the Centre to put in place a special mechanism to compensate large manufacturing states for five years in the first phase of the GST.
Senior officials said the setback would not only further worsen the state’s finances but had also forced the Maharashtra government to recast its own budgetary plans for 2016-17. The Devendra Fadnavis government will be presenting its second budget on March 18.

With just a fortnight to go before the budget is unveiled, the government has been forced to tap new sectors and broaden its own tax net to make up for the shortfall.

Finance Minister Sudhir Mungantiwar said, “It is a fact that we had made plans for 2016-17 considering that GST will be implemented and that a special compensation mechanism for states will be in place. We have now switched over to Plan B for the state’s budget. But we are confident that we would still be able to raise sufficient resources to drive our development agenda.”

In 2015-16, the state was also hit by the BJP government’s decision to abolish the toll levy in most parts of the state. “We were hoping that implementation of GST will boost revenue,” Mungantiwar confirmed. The state coffers were also impacted by the third spell of drought.

At the start of 2015-16, the government had projected a revenue deficit of Rs 3,757 crore and a fiscal deficit of Rs 30,733 crore. But the additional revenue expenditure and sluggish revenues worsened the deficit numbers, sources confirmed. The state government, however, is keen to improve on the 2015-16 plan size of Rs 54,599 crore. This is expected to go up to close to Rs 55,500 next fiscal.

Sources confirmed that the government had plans to restructure the model of collecting royalty for extraction of major and minor minerals. “We are now planning to link it to actual value of transactions,” said a senior official. The royalty was previously collected on the basis of rentals. “The government will mop up an additional Rs 1,500 crore through this mechanism.” The government might also set up a tribunal and introduce an amnesty to tap unrealised sales tax. Maharashtra has reported unrealised tax arrears of Rs 39,335 crore.
Speaking to The Indian Express, Mungantiwar said, “We have plans to broaden the tax base. We are also looking to tap new sectors for raising revenue.”

On the expenditure side, the government has plans to replicate the Centre’s move of introducing a sunset date for commencement and completion of each scheme to cut down on non-productive expenditure. Senior officials also confirmed that some plan side schemes might have to be pushed to non-plan.

In what may provide a measure of comfort to the state government, the Centre’s budget has increased the proceeds that the state government would derive from union taxes and duties from Rs 28,105 crore in 2015-16 to Rs 31,627 crore in 2016-17. The Central assistance in grants to Maharashtra is also expected to rise to Rs 22,940 crore in 2016-17.

Leave a Reply

Your email address will not be published.

Solve this and then Post Comment *

scroll to top