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Deficit-hit Maharashtra seeks Centre's nod to impose tax on service sector

Maharashtra Finance Minister Mahadev Shivankar has made a fervent appeal to the Union government for financial assistance as the revenue deficit has ballooned to Rs 52.3 billion.

In a meeting with Union Finance Minister Yashwant Sinha early this week in New Delhi, Shivankar also deliberated upon the terms of reference for the 11th Finance Commission. He demanded that Maharashtra be given the central assistance and permission to impose taxes on the services sector.

As revenue mop-up from Maharashtra was considerable in the past, the state could not avail of financial assistance given to backward states according to Section 275 of the Constitution.

But the whopping revenue deficit this year has made it necessary for the state government to seek help in accordance with Section 275, Shivankar said.

He also disclosed that the state government might face a severe cash crunch after implementing the recommendations of the Fifth Pay Commission. He suggested that advice of the state governments must be taken into consideration before devising the national wage policy. Similarly, the central government should also increase the quantum of funds allocated under Natural Disaster Fund.

While pointing out that the criterion of per capita income while deciding upon the division of taxes collected by the Union government to be allocated to various states is inappropriate, he said, there are certain regions where per capital income is far below the national average. This should be taken into consideration, he added.

He also suggested that while assessing the financial strength of a state, various criteria like the amount of funds allocated to various corporations and public developments projects should be taken into consideration besides assets and debts.

A true picture of a state financial strength is difficult to assess without forcing in the guaranteed funds allocated, he said.

While making a fervent plea for the development of backward regions in every state, Shivankar made a strong case for central assistance for setting up an information technology centre in Maharsthra. He also pointed that Bombay alone contributes 30 per cent of the total tax collected by the Union government and asked the Finance Commission to give special treatment to Bombay.

Compiled by Prasanna D Zore from Marathi media