Despite a rise in tax collections, the Maharashtra government is striving to curb revenue and fiscal deficits. In an interview with Sanjay Jog, Finance Minister Sunil Tatkare explains the government’s strategy. Edited excerpts:
What is the six-monthly position of state revenues?
The main revenue sources — sales tax, excise, stamps and registrations and tax on vehicles — are showing growth, as the economy is on a recovery path. The sales tax revenue was Rs 20,647 crore in September, compared to Rs 16,157 crore in the corresponding period last year. This is mainly due to insistence on filing e-returns on the due date, imposition of penalty on non-filers as well as the facility of e-payment to all traders who file returns on a monthly or a quarterly basis.
The transport sector is booming throughout the country. We expect to see good growth in receipt of taxes on vehicles during the remaining six months of the financial year. While stamps and registrations have shown a healthy increase, the rates have already reached a high level and investors may refrain from investing more hard-earned money in very costly apartments. So, one needs to watch the situation here. Excise revenues, however, are lagging the target for the period ended September. Excise collection is Rs 2,600 crore as against 2,900 crore earlier, five per cent below the target.
Is the rise in tax collection as you estimated?
It exceeds expectation slightly. Further, the excellent monsoon will boost agricultural income in both kharif and rabi. This will be furthered by the massive increase in the minimum support price. This will add to farmers’ incomes and is likely to have a multiplier effect on the entire state’s economy. Kharif and rabi crops are likely to achieve a record increase in production this year. So, I hope the growth story will continue in the coming year.
Has the shift to the value-added tax been stabilised?
VAT has been established firmly. Our tightening of the sales tax system has got a positive response from all sides. Reliance on e-returns and e-payments has greatly facilitated this by removing direct interface between traders and assessing officers. We are further trying to improve our system to be fully ready for the goods and services tax (GST) as and when it is introduced. Maharashtra has extended full support to the finance minister’s proposal regarding constitutional amendments and consequent changes in the tax regime. The Empowered Committee of State Finance Ministers has appreciated the lead taken by us in creating IT infrastructure for the sales tax department and other states are emulating our example.
Once GST is introduced, Maharashtra is likely to lose the revenue it gets from the central sales tax. However, this will be more than made up by diversion of service tax collections, as we generate the highest services tax revenue in the country.
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What about revenue and fiscal deficits?
We were hopeful of reducing our revenue deficit during the current year, but this seems difficult task, particularly due to the increase in dearness allowance by 18 per cent during a single year — it translates into roughly Rs 5,400 crore per annum.
However, we are able to meet our loan repayments and interest payments on time and there has been no recourse to overdrafts in four years. The government of India has restricted states’ borrowings to three per cent of their gross state domestic products. While our need for more resources for the planned outlay are genuine, we are sticking to the target set by the finance ministry and our borrowing will be well within this limit. We have to be careful in taking decisions involving higher subsidies.
