But chief minister says cost will be recovered by raising revenue from sales tax, stamp duty.
The state government which boasted of a surplus budget at the start of the financial year on Wednesday feared that the tax concessions extended by the state government and the Centre will lead to a deficit budget. The tax relief given on diesel and kerosene prices will cost the state exchequer almost Rs1,400 crore.
Chief minister Prithviraj Chavan said, “The state decision to enforce a 2% cut on VAT to bring down prices of diesel and kerosene will cause state treasury a revenue loss of Rs438 crore. And the Centre’s decision to cut down excise and customs duties will directly bring down the state tax share by Rs800 to Rs1,000 crore.”
Responding to harsh reactions from the people, the state cabinet decided to reduce the sales tax on diesel by 2%. This would result in the loss of Rs438 crore to the state exchequer. Apart from this, the devolution of state tax share by the Centre will reduce by Rs820 crore due to the reduction in the excise and customs duty.
“The loss to the Centre due to the reduction is nearly Rs49,000 crore per annum. Of that the devolution to Maharashtra would have been 5.16% or nearly Rs820 crore. This may result in defusing our plan of surplus budget for the current financial year,” Chavan said.
Though Chavan asserted that his government would not let the development projects hit, he admitted that it would be a tough task before him. “Our endeavour would be to utilise plan and non-plan allocation at its fullest on development projects. We will try to raise the revenue from other heads like sales tax, stamp duty,” he said.
However, the question being raised is the reduction of 72 paise per litre on diesel was only amount that was resulted as the unexpected windfall to the state revenue due to the hike of Rs3 per liter by the Centre four days ago. “26% VAT on Rs3 results in the revenue of 72 paise to the state exchequer. Today’s announcement was nothing but state’s act of giving up the additional income resulted due to the hike,” said an observer.
“It cannot be termed as the unexpected windfall as when we plan the annual budget, we anticipate some hike in the fuel prices and hence the rise in the revenue through taxes. The hike was expected and hence it’s a loss to the revenue,” said Sudhir Srivatsava, principal secretary, finance department.
Justifying the decision of not reducing the domestic cylinder prices, Chavan put the ball in Centre’s court saying that the state government has proposed the dual subsidy on the domestic cylinders.
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