New taxes, hikes likely as Maha faces financial crisis

After hiking value added tax (VAT) on various items on Wednesday, the state government is mulling additional resources in the form of taxes and levies to earn more revenue.

After hiking value added tax (VAT) on various items on Wednesday, the state government is mulling additional resources in the form of taxes and levies to earn more revenue.

The hike in VAT -- Rs2 a litre on petrol and diesel, 5% on liquor, cigarettes and soft drinks -- will help the state earn Rs1,600 crore in six months of the fiscal, a meagre collection compared to its deficit (when expenditure overshoots earnings) of more than Rs7,500 crore.

Eknath Khadse, state agriculture minister and in-charge of the excise department, said his department was working on a proposal to hike taxes on luxury goods for mobilisation of revenue to effectively “fight the drought”, which may be tabled before the cabinet.

“The relief packages for farmers tackling agrarian crisis have cost us a lot. Although the satisfactory rain in the past two weeks has proved to be of great help, the drought risk remains. The government will have to prepare to face the challenges,” said Khadse. “We will have no option but to increase taxes on luxury items such as dining and stay at five-star hotels, movie tickets, shopping in malls, among others.”

Finance minister Sudhir Mungatiwar hinted at more such decisions in the next few months, saying his department has asked all other departments to tap resources for additional revenue generation and take measures to curb the expenditure. He said the government will convene a special meeting of the cabinet to discuss the issue.

“The revenue generated is much below the target set for the first six months, as the revenue from key departments such as excise and sales tax has been hit by a market slump. The unbudgeted expenditure of relief to farmers, cost of scrapping local body tax and exemption to small cars from toll have resulted in a thumping deficit,” said an official from the finance department.

The official said the crisis has intensified as the projection of revenue receipts of about Rs10,000 crore from land-related deals could not be realised. Revenue and urban development departments had projected revenue from premium, additional FSI and TDR on various land deals, but the departments failed to roll out the policies as planned at the beginning of the year.

According to the preliminary estimates, the current projected deficit has reached Rs7,500 crore, which was Rs3,557 crore at the time of presentation of the budget in March. It is expected to cross Rs12,000 crore by the end of the year.