State Finance Minister Jayant Patil has warned of an imminent tax hike to shore up revenue on account of implementation of the goods and services tax (GST) regime in the State. The State government will be compelled to seek various remedies, including increasing general taxes, if the Central government does not pay the committed GST compensation at the earliest, he said, following a consultation meeting for the Union Budget 2020-21 in New Delhi.
The meeting, chaired by Union Minister for Finance and Corporate Affairs Nirmala Sitharaman, was followed by a discussion of the GST Council on Wednesday. The Maharashtra delegation, which Mr. Patil led, urged the Centre to contribute ₹14,000 crore towards damage caused by natural calamities. “On behalf of the Government of Maharashtra, we have asked Government of India (GoI) to help to the tune of ₹14,000 crore for all damage caused by natural calamities. I will be proposing various measures on behalf of several stakeholders of Maharashtra,” Mr. Patil said.
The Maha Vikas Aghadi government’s coalition partner Shiv Sena has already warned of a ‘conflict’ with the Centre if it does not pay compensation for revenue losses in the States on time. During the discussion, Mr. Patil requested the GoI to pay the promised Central assistance, which is pending for a long time. The demand of ₹14,000 crore includes pending assistance, he said. “In addition to this, there are various projects which the GoI is supporting but funds are not reaching us on time.”
The minister confirmed participation in a discussion on the rationalisation of rates and changes in slabs during the GST Council meeting with finance ministers of other States. Mr. Patil said States will have to take a “considerate” view on the issue of raising the tax slabs since revenue is falling in the past few years owing to adjustments in GST rates. “At various points before some elections, the GoI reduced taxes. This has affected the revenue of various States, and Central support to bridge this gap is not happening,” he said. Maharashtra will look to shore up revenue, including focussing on compliance, and hike taxes as a last resort to remedy the situation, he added.
An editorial in the Sena mouthpiece Saamana on Saturday had warned that the compensation for loss of revenue from implementation of the new tax regime must be shared immediately or a new ‘struggle’ could start between the Centre and States. The failure to pay the compensation and haphazard of implementation of economic policies by New Delhi has resulted in ‘economic anarchy’, Saamana said.
The Sena mouthpiece had said Ms. Sitharaman had assured that the Centre is committed to paying GST compensation but earlier, the government had promised payments of compensation would be made every two months. “The Centre had promised to pay ₹50,000 crore to States to compensate them on account of revenue loss due to GST implementation. But the States have not received the compensation for the past four months,” the editorial said. “The money belongs to the States and any further delay can spoil their financial situation. The States will have to raise their voice against the Centre if their rightful share in resources is not passed on to them,” it said.
