Although the changes in the Goods and Services Tax are pleasing to the common man, they will result in a reduction in the state government's revenue. As these changes will be implemented in the coming days, the state government's revenue will decrease by about INR 7,000 crore, according to estimates by the Finance Department.
The central government has made changes in the Goods and Services Tax (GST). Due to the reduction in GST on goods essential to the common man, the revenue received by the state government through this channel will also decrease.
The Finance Department has set a revenue target of INR 2.5 lakh crore for the financial year 2025-26. This target will be achieved through GST, Inter-State GST, Value Added Tax and Business Tax. The central government has reduced this level from four to two. From September 22, there will be only two levels, five percent and 18 percent.
Similarly, tax on many items has been reduced to zero. In this, like the central government's share, the state government's GST will also be reduced. Taxes on medicines, health insurance, and food items will also be reduced.
Interstate goods and services tax has been reduced and this tax has been abolished on imported goods related to national security and aviation. This will have an overall impact on revenue, and according to estimates from the Finance Department, there will be a revenue loss of INR 7,000 crore.
The Finance Department is conducting further studies on this and the exact figures will be out soon. Although the new GST rates are likely to be implemented from the date of establishment, the notification in this regard from the Central Government is awaited.
States demand compensation
A study of the revenue shortfall due to changes in the Goods and Services Tax was presented at the GST Council by the states of Karnataka, Telangana, Sikkim, Punjab, and West Bengal. Especially these are non-BJP ruled states. However, no such submission has been made by Maharashtra to the Centre. The government has taken the stance that if these states get compensation for revenue deficit, then this rule will automatically apply to all the states.
Efforts to increase revenue
In the financial year 2024-25, the state had earned a revenue of INR 2,25,374 crore through GST and other taxes. This year, a revenue target of INR 2.5 lakh crore has been set, with an 18 percent increase in revenue.
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However, currently, the revenue growth till July this year compared to last year is 12 percent. The state government is implementing people-oriented schemes like Chief Minister Majhi Ladki Bahin Yojana. This has already put pressure on the government exchequer. While various options have to be explored to increase revenue, the Finance Department will have to work hard to achieve the revenue growth target due to the reduction in the Goods and Services Tax, which is an important source of revenue.
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