In a budget aimed at containing inflation and mobilising revenue for infrastructure projects, the Maharashtra government on Thursday spared foodgrains, flour and a few other essential commodities from VAT, but levied a whopping 12.5 per cent state tax on cigarettes, gutkha and raised excise duty on country liquor.
Projecting an impressive 9.3 per cent economic growth, Maharashtra Finance Minister Jayant Patil presented a Rs 510 crore (Rs 5.10 billion) revenue surplus budget for 2007-08 in the state assembly.
Contrary to expectations, Patil did not announce any roadmap to abolish octroi as demanded by trade and industry in the budget, which estimates revenue to grow by 13.33 per cent improving fiscal management by lowering debt burden by 2 per cent to 25.53 per cent of state GDP.
The exemption from VAT to foodgrain, flour, chillies, turmeric, coconut, Solapuri chaddar and tea will continue for another six months, he said while raising VAT to 12.5 per cent on cigarettes, gutkha and other tobacco products.
But Bidis and manufactured tobacco were exempted from the state tax.
Excise duty on country liquor was increased by Rs 5 to Rs 60 per litre and the minimum retail price on Indian Made Foreign Liquor would be four times the manufactured cost if it is below Rs 92 per litre.
These and a few other tax measures will enable the state mobilise some additional revenue to make up for the loss of Rs 1,000 crore (Rs 10 billion) as a result of the phased out Central Sales Tax which would reduced from 4 per cent to 3 per cent in 2007-08.
Maharashtra's debt mountain: Rs 132,969 crore
Maharashtra is reeling under a heavy debt burden, which is expected to touch Rs 132,969 crore (Rs 1,329.69 billion) in the current financial year, the Economic Survey of Maharashtra said in Mumbai on Thursday.
It is 26.7 per cent of the state's gross domestic product.
In 2005-06, the debt stood at Rs 125,379 crore (Rs 1,253.79 billion) as compared to Rs 50,319 crore (Rs 503.19 billion) in 2000-01.
The state's total debt consists of public debts, borrowings from small savings and provident funds and borrowings from public account transactions, including interest bearing obligations such as reserve funds and civil deposits.
The compounded annual growth rate of loans raised for the period 2000-01 to 2005-06 was 5.9 per cent. The compounded growth for repayment of loans during the same period was 10.7 per cent.
The government aims to repay high cost debts and has already paid Rs 14,671 crore (Rs 146.71 billion) till March 31, 2005, the survey said.