State to incur Rs 14,000 crore losses every year

MUMBAI: Facing a financial crunch with a huge debt burden of Rs3.4 lakh crore, Maharashtra stands to lose Rs14,000 crore in revenue every year once the Good and Services Tax regime comes into force. The centre will compensate states for revenue loss for the first five years, but how will Maharashtra make up the shortfall after that?

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Under the GST regime, expected to come into force from April 1, 2017, all the indirect taxes imposed by the Centre and states will be abolished. Maharashtra has six major indirect taxes — value added tax (VAT), entertainment duty, luxury tax, lottery tax, Octroi and local body tax (LBT). All these will go, except VAT on petroleum products and state excise duty on liquor. State finance minister Sudhir Mungantiwar confirmed the state will lose tax revenue of Rs14,000 crore after GST comes into force, but maintained that the new tax regime would benefit Maharashtra.

“Maharashtra will be benefited from the GST regime. We are all set for the implementation of the GST from April next year. The training module for officials has been formulated. Though we will be losing tax revenue of Rs14,000 crore a year, the Centre has assured us compensation for the first five years,” he told HT.

Why so much revenue loss? The Brihanmumbai Municipal Corporation (BMC) still collects Octroi (entry tax for goods) of around Rs 6,500 crore annually, its major revenue source. The rest of the civic bodies have LBT, the revenue from which totals around Rs7500 crore every year. Once these levies are abolished, the loss is around Rs14,000 crore every year.