The state government decided to scrap local body tax (LBT) from Saturday for traders with an annual turnover of less than Rs50 crore.
Already in a financial mess, the state government may lose around Rs4,210 crore in stamp duty collections devolved to municipal corporations and compensation for revenue losses.
The state government decided to scrap local body tax (LBT) from Saturday for traders with an annual turnover of less than Rs50 crore. But the tax in the area of 25 municipal corporations will continue for 1,162 traders whose turnover is above the Rs50 crore limit. Such people form just 0.15% of the total base of 8,09,553 traders.
These 25 corporations, (excluding Mumbai, where octroi, which replaced LBT, is still in force), are entitled to Rs7,648.82 crore in 2015-16, considering the average of maximum incomes for the last five years with an 8% rise. This translates into around Rs 4,666 crore for the remaining eight months of the financial year.
Finance minister Sudhir Mungantiwar told dna that the state would have to give around Rs 4,210 crore to these civic bodies through stamp duty collections and in case these fell short, through compensation for the loss of revenues. While stamp duty will be collected in these municipal areas by the department of registration and stamps, funds will be devolved to the municipal bodies.
However, since traders with a turnover of over Rs50 crore will continue paying LBT, they will collectively contribute Rs1,056 crore to the coffers of these municipal bodies, leaving a gap of about Rs3,610 crore. In addition, the state will have to compensate 18 civic bodies for around Rs600 crore for revenue shortfalls, leading to an estimated burden of Rs 4,210 crore, said Mungantiwar.
Seven municipal corporations, namely, Kalyan Dombivali, Latur, Nagpur, Navi Mumbai, Vasai Virar, Thane and Pune, stand to gain as stamp duty collections outstrip LBT collections in their areas by around Rs600 to 700 crore, said Mungantiwar. In the other 18 municipal corporations, the stamp duty collected is less than LBT collections, which will force the state to reimburse around Rs 600 crore for loss of revenues for eight months.
"This will be made good through stamp duty collections and the balance will be compensated by the state government," said Mungantiwar.
Maharashtra is already groaning under Rs3.38 lakh crore loans and borrowings and the debt servicing burden amounts to an annual Rs27,000 crore. "The situation is critical," noted a source, adding that the state government needed to boost revenue mobilisation.
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