New tax system to hit state revenue

Mumbai: With the implementation of GST starting midnight Friday, the Maharashtra government will lose revenue for the next two months, putting even more financial pressure on the state exchequer.

While the Centre has promised to compensate for the loss caused by GST, the compensation will come only after two months i.e. in September. State taxes have been subsumed in the GST including VAT, entertainment tax, luxury, tax on lottery, Octroi, and purchase tax.

Conceding the fact, a senior official in the state finance department said that there was fear that the state would lose revenue.

“We can levy three taxes – stamp duty, excise and the motor vehicles act. Also, the state GST will help us. But still, there will be a crunch of funds for the next few months as compensation from the Centre will come after every two months,” the official said.

The state government gets revenue of around Rs 14,000 crore every month which includes sales tax, stamp duty, and excise.

The Centre will compensate 14 per cent of the state revenue every year. However, if there is a loss in revenue, compensation will be reduced, the state fears.

In April this year, the state collected Rs 14,217 crore and in May, Rs 14,374 crore. The June figure is yet to be compiled but the revenue will be more or less the same.

For July and August, it is expected that the same revenue will not be collected as traders have asked for three months’ time to pay GST. So, even the Centre is unlikely to collect the desired tax initially. The state government on the other hand is reeling under pressure of the farmer loan waiver of Rs 32,000 crore. It is struggling to raise funds.

Sources in the finance department said that the coming months will be tougher for the government as revenue collection will be hit by GST implementation.