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Maharashtra ministers split over tax on consumables
October, 03rd 2015

Two senior ministers in the BJP-led Maharashtra government, Revenue Minister Eknath Khadse and Finance Minister Sudhir Mungantiwar, are at odds over the decision to increase tax on several consumer goods including liquor and cigarettes for raising additional funds to offset rising expenditure on drought mitigation.

The majority of cabinet ministers had backed Mungantiwar’s decision to raise taxes moderately to meet expenditure on drought relief, with the exception of Khadse, the seniormost member of the cabinet, who publicly voiced his protest.

Khadse, who has often targeted the chief minister, told The Indian Express, “Yes, I opposed the tax hike. I feel there are other sectors which could have been explored to mobilise revenue; entertainment tax can be raised. Those in the upper strata used to heavy spending would not mind spending Rs 25 to Rs 50 more on movie tickets. The tax on five star or seven star hotels or on racing can be raised. All such luxurious modes of entertainment and lifestyles which cater to only the rich segment should have been taxed to increase revenue. It would been more justified then.”

Khadse said huge funds can be generated by unlocking land in urban areas or recovering arrears that industries owe the government.

Besides tax on liquor and cigarettes, the government had imposed a surcharge of Rs 2 on diesel and petrol. On Friday, Shiv Sena president Uddhav Thackeray joined Khadse in voicing his protest against the tax hike.

Mungantiwar said the tax proposal was discussed and a decision was taken collectively at the cabinet meeting chaired by Chief Minister Devendra Fadnavis. Mungantiwar said, “We had to generate Rs 8,500 crore to meet growing financial challenges because of natural calamity including drought, and for other projects. But we adopted a soft tax policy which will help us to generate only Rs 1,600 crore.”

“When local body tax was abolished on August 1, 2015, five to six per cent tax on liquor and cigarette was waived. Therefore, introducing a five per cent excise tax cannot be perceived as overburdening the public,” he said. In case of diesel and petrol, the abolition of LBT implies no further local purchase tax on diesel and petrol, which justifies the Rs 2 surcharge, Mungantiwar said.

Khadse’s protest against the cabinet decision has not gone down well with the BJP top leadership. A senior party official told The Indian Express that Khadse should not have made it a public issue.

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