State government lost ₹55,000 crore in tax revenue
MUMBAI: The four months of lockdown cost the state exchequer ₹55,000 crore in tax revenue against the budget estimates. Although there are no estimates available for the economic losses and how they will affect the state GDP, manufacturing, services, real estate and hospitality are the worst-hit sectors, according to government officials and industry insiders.
After starting a partial shutdown from March 14, the Maharashtra government imposed a complete lockdown across the state from March 23. By then almost all commercial-industrial activities had come to a halt, as shops, establishments and offices were shut down and local train services were stopped.
Rajiv Podar, president, Indian Merchants Chamber, said, “The industrial sector witnessed 50%-70% production losses during the lockdown, mainly because of scarcity of labour, insufficient mobility and logistical support. Although it would be early to predict, Maharashtra can see a shrinkage of 3.5%-4.5% in state GDP compared to last year. It will depend on the duration of the lockdown and time taken to bounce back. The state should now provide support to the manufacturing sector, with working capital and focus on creating rural demand. By engaging the rural population in agriculture activities, rural agriculture infrastructure and their income level can be raised, which can in turn help revive other sectors like FMCG, infrastructure.”
Nayan Shah, president, Credai-mchi, said most of the ongoing 11,000 real estate projects in Mumbai Metropolitan Region have either been stalled or are progressing at 15% of their expected pace. “The industry is going through major challenges, be it in terms of operational costs or interest paid on the loans or shortfall of construction workers. Gaining back the confidence of financial institutions, customers and even labourers is a challenge. A majority of the 11,000 projects registered with RERA are stalled due to the lockdown. The government should immediately extend a helping hand by reducing stamp duty, premium rate and fees for nod by local authorities,” he said.
Amitabh Taneja, chairman, Shopping Centres Association of India, said, “A mall usually generates sales of ₹60 crore a month and stores goods worth ₹300 crore-₹400 crore at any given point. Stocks worth hundred of lakhs with the retailers are getting damaged and the value is expected to be lost, if not sold immediately. On the other hand, the exchequer has lost at least ₹8,000 crore in four months towards GST. The lockdown may see a loss of 50 lakh jobs in malls and with retailers,” he said. Maharashtra has 75 malls and 50% of them are in the Mumbai Metropolitan Region.
Although the state relaxed the curbs and allowed industrial units to operate from April 20, only 65,208 of the 7.34 lakh industrial units started their operations. Besides the fear of Covid-19, shortage of labourers, disruption of supply chain, logistics and slowdown have resulted in lukewarm response from industries.
Deepak Sood, secretary general, Associated Chambers of Commerce and Industry of India (Assocham), said, “The losses to the economy could go up if we look at the drop in GST collection and GDP growth rate. India is in a better position than most other countries and things are moving back to normalcy rapidly. It may take three-six months to revive, depending on the sector. The rural economy is doing well and is expected to perform better this year, owing to satisfactory rainfall. Although Maharashtra is the worst-hit by Covid, it is a major contributor to the country’s GDP and is expected to bounce back sharply.”
The Maharashtra government suffered losses of ₹26,000 crore against a targeted revenue of ₹45,000 crore in March, the last month of the fiscal. With the tax revenue losses of more than ₹23,000 crore in April and May and estimated losses of more than ₹10,000 crore in July, the state exchequer’s accumulated losses have reached over ₹55,000 crore. “We were expecting the annual revenue receipt to be hit by ₹70,000 crore, but in the current scenario, it may be more. We have already borrowed ₹30,000 crore for monthly salary and pension bills, recurring establishment cost and incidental expenses such as Covid-19 and cyclone. We have already curtailed the expenditure on development works worth ₹70,000 crore,” said a state government official.
A major chunk of the state revenue comes from GST, excise on liquor, stamp duty and registration and taxes on vehicles.
“The revenue from excise dropped to ₹2,436 crore against estimates of more than ₹5,000 crore till July 20. Similarly, the GST revenue dropped to ₹12,906 crore against the estimated collection of ₹25,600 crore till July 20. With the extended lockdown in various parts of the state this month, the revenue losses are more than ₹10,000 crore than the estimated collection in July,” another official from the finance department said. “From raising revenue and borrowing to austerity measures and cutting capital expenditure, steps are being taken to cope with the situation,” said Manoj Saunik, additional chief secretary, finance.
Industries minister Subhash Desai said, “The losses are huge, but it is also difficult to predict the economic losses to the state owing to the lockdown. The state economy will bounce back after the unlocking is completed. We have taken steps to attract industries and investment.”