Why Did Maharashtra Oppose GST?

Before we delve into why the state of Maharashtra opposed the implementation of Goods and Services Tax (GST), we feel it necessary to have GST explained to you. Many indirect taxes have been replaced in  India by the GST. After being passed in the parliament on 29th March, 2017,  the Act was implemented on 1st July, 2017. below in this article, we will cover Why Did Maharashtra Oppose GST.

To have GST explained in simple terms, the Goods and Service Tax is imposed in the event of the supply of goods and services. The aim was to have a slew of indirect taxes that existed in our country replaced by the GST.

Why Did Maharashtra Oppose GST
Why Did Maharashtra Oppose GST

Reasons Behind Maharashtra’s Opposition To GST:

What was supposed to simplify the process of levying taxes and help ease its calculation has actually turned out to be quite a nightmare for businessmen and traders in Maharashtra. Here’s why-

Cumbersome Process-

While the intention was to have GST explained without any hassles, it’s a common refrain among traders and businessmen alike that far from being simple, the process is actually very ‘cumbersome’. They complain that they are actually having to spend more effort, money and time on having the filing of GST sorted out. What’s more, they complain that they have had to recruit more and more accountants simply to work on GST! Many have even gone to the extent of saying that GST has been a harder blow to their business than demonetization.

Rise In Cost Of Filing Taxes-

With the filing of taxes under the GST regime being a highly specialized and cumbersome process, new software packages have had to be installed which involved considerable costs. Moreover, employees have had to be trained specifically for the purpose of filing GST returns. It goes without saying that such training has been an expensive affair. It has resulted in work being hampered with time being invested in training. That has been quite a blow to small and medium-sized businesses.

Opposition To Inclusion Of Real Estate Sector Under The GST Regime-

The Maharashtra government has expressed serious reservations about having GST implemented in the real estate sector. It’s of the opinion that an in-depth analysis should be carried out before any decision is taken. The government is apprehensive of the impact that it might have on the finances of a state. While the current GST rate stands at 18% on under-construction real estate projects, the state government has suggested that two rates be considered; 5% for low-cost housing and 12% for others. 

The Maharashtra government has also tried to convince the GST Council that it consider lowering the GST rate on real estate and absorb the cost of property registration and stamp duty. It is also argued by some analysts that having the entire real estate sector brought under the ambit of GST will be a cumbersome and long-drawn process as it might necessitate far-reaching changes in the GST Act and amendments to the Constitution.

Maharashtra’s Opposition To The Introduction Of GST Rate Cuts In The Auto Industry

While expectations of a reduction in rates in GST for the automobile have risen, a discordant note has been sounded by Maharashtra which has opposed any such cuts in the rates. The automobile industry is known to contribute as much as 49% of the country’s manufacturing industry. However, the industry is now in the midst of an unprecedented crisis. Overall sales have declined by as much as 14% this fiscal itself with the overall drop being as high as 22%. The industry has therefore been asking for a rate cut of 10% in GST. 

While the demand has had a favorable response from the center with the finance minister, Ms. Niramala Sitharaman, junior minister Anurag Thakur and transport minister Mr. Nitin Gadkari being open to it, the move has been opposed by Maharashtra. It has the support of West Bengal, Haryana and Kerala too. 

The GST Council is currently of 33 members and includes the finance ministers of all the states. Ms. Nirmala Sitharaman and Mr. Anurag Thakur are the other members. All decisions have so far been taken unanimously. That’s why Thakur said that they wouldn’t want this occasion to be an exception. He, therefore, suggested that the authorities in the automobile industry approach the state finance ministers separately and try to bring them on board. 

The automobile industry has urged the authorities to arrive at a decision at the earliest. That’s because they are of the opinion that people are postponing any new purchase of vehicles expecting a rate cut. They feel that the empty showrooms are a result of people avoiding them looking forward to a much-awaited rate cut. People have also canceled bookings expecting the rate cut.

Conclusion

What was actually meant to ease the tax regime has, in fact, made it even more cumbersome and time-consuming. Many small and medium-sized business owners opine that GST has been a harder blow to them than demonetization.

It is the protection of the interests of small and medium-sized businesses that has been the main reason behind Maharashtra’s opposition to GST. It was felt that the costs involved in making these businesses adapt to the new tax regime would be a big blow to their running costs. The new software would have to be implemented and employees would have to be trained on the new methods of taxation. That would be time-consuming, a luxury that most small and medium businesses could hardly afford.

The Maharashtra government is also opposed to the introduction of GST in the real estate sector as it fears a loss of revenue. It has suggested separate tax slabs for low cost and other housing projects. It is the fear of loss of revenue again that has influenced Maharashtra to join hands with Kerala, Haryana and West Bengal to oppose cuts in the rates of GST taxes for the auto sector. This is despite the fact that the sector is going through an unprecedented slump.