Sushil SOS on tax share

Patna: Bihar has urged the Centre to continue with the old routine of monthly disbursement of the states' share in central taxes instead of the new system under which the money would be given every quarter, arguing that this could force the state government to borrow from the market to meet its committed monthly expenditure.

The new system is set to come into effect from the 2018-19 fiscal.

Under the new system, the states' share in corporation and income tax would be disbursed on quarterly basis on June 15, September 15, December 15 and March 15. Also, the date of transfer of the states' share in other central taxes such as customs duty, excise duty and GST has been fixed for the 15th and 20th of every month instead of the 1st of every month.

The issue was raised by deputy chief minister Sushil Kumar Modi, who heads Bihar's finance department, during pre-budget consultation of state finance ministers with Union finance minister Arun Jaitley in New Delhi on Thursday.

"We foresee that this would have an adverse impact on the ways and means of the state and that the state government would be forced to avail market borrowings and other sources from the very beginning of FY 2018-19 towards committed expenditure of Rs 4,500-5,000 crore every months from April to June 2018 in the form of salaries, pensions, interest payment, repayment of principal amount, etc," Modi said in his speech at the pre-budget consultation meeting.

He added that in the light of this, there was an urgent need to continue with the existing arrangement of monthly disbursement of the states' share in central taxes.

Concurring with Bihar's stand, economist and member-secretary of Asian Development Research Institute Shaibal Gupta said: "States having sufficient internal revenue sources would not face much trouble but a state like Bihar with limited sources of internal revenue would be in a soup."

He said the new system was disadvantageous to states like Bihar. "It is akin to giving quarterly salary to a man doing some job. How would he meet his recurring monthly expenditure like payment to the milkman, newspaper bill, electricity bill, etc?" said Gupta.


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