Panaji: The decision arrived at by the state cabinet to reduce road tax by 50 per cent on purchase of all types of motor vehicles for three months till December 31, 2019, is likely to hit the revenue of the state treasury with an estimated loss of over Rs 50-60 crore in the current fiscal year.
It is pertinent to note that the state is currently facing a revenue generation crunch and the government has been making attempts to balance the financial situation by borrowing money from the market on regular basis though it is within the prescribed limit of 3 per cent of the gross state domestic product.
Sources told this daily that the government has stated in the cabinet note that the loss of revenue on account of reduction in the motor vehicle tax will be partly compensated by way of revenue through the Goods and Services Tax (GST) collected on induced sale of vehicles, caused by incentivising another tax.
The government has also justified in the note that there will be an additional Value Added Tax (VAT) collection on the sale of petrol and diesel which these newly purchased vehicles will use in the months to come, arguing that such a measure will benefit the economy but qualification in rupee cannot be done.
Interestingly, the sources also informed that the cabinet note clearly stated that there was no clearance for this proposal from the finance department. The note stated that the finance department had sought details of revenue loss to the government on account of reduction in the rate of road tax. The finance department had also questioned whether the reduced rate of tax would be compensated by a resultant increase in the sale of vehicles.
Moreover, according to the sources, the cabinet note stated that the Transport Minister had proposed to cut tax on motor vehicles from October 1 to December 31, 2019, considering the prevailing circumstances, and as per the assurance given in the last assembly session, it was approved by the Chief Minister and file returned to the department to be put up for notification for government approval and vetting by the law department with verbal instructions to put it up for cabinet approval post facto.
It also claimed that the proposal was vetted by the law department and the file was received with verbal instructions of the Secretary Finance to put it up for cabinet note as table item.
As far as the financial implication is concerned, sources said that the cabinet note maintained that currently the economy is sluggish and a push is needed to kick-start the economic activity by way of fiscal and non-fiscal measures. When a minister was contacted, he said that a copy was not circulated among the ministers present for the cabinet meeting. Hence, they were not aware about what exactly the proposal said.
As per data given by the transport department, the revenue receipts through road tax for the last five years were Rs 414.19 crore in 2014-15, Rs 223.26 crore in 2015-16, Rs 235.97 crore in 2016-17, Rs 292.02 crore in 2017-18 and Rs 181.02 in 2018-19, while in the current fiscal year up to August 2019, it is Rs 87.74 crore.