The Hindu Business Line : GMCI calls for taxes rationalisation

KARNATAKA, which was first among the States to rationalise tax rates in preparation to the aborted value added tax (VAT) regime, suffers from not only multiple rates of tax affecting trade and industry but also steep rates on certain commodities resulting in diversion of trade to other States.

Pointing this out in its pre-Budget memorandum submitted to the Government, the Greater Mysore Chamber of Industry (GMCI) has made a wish-list calling for rationalisation of taxes, simplifying procedures for registration of trade and scientific classification of goods to avoid levy of higher taxes on certain items.

Electronics industry has been hit hard by a steep rate of 13 per cent on certain items. The industry has been requesting the Government for proper classification and reduction of rates, said Ms Indira Prem Menon, President of GMCI.

Ms Menon said: "though this year's budget exercise is going to be an arduous job, we do hope the Government will bring in proposals, which will usher in a strong and vibrant industrial atmosphere. The tax regime should be transparent, simple and broad-based resulting in better tax adherence and compliance".

She said against the three floor-level rates and two special rates of commercial taxes that were suggested by the Empowered Committee of States prior to VAT migration, Karnataka has nine rates thus resulting in diversion of trade to other States and loss of revenue due to non-compliance. Karnataka had in fact introduced three floor rates of 4, 8 and 12 per cent with two special rates of 20 per cent, 3 and 1 per cent. However, it increased it to nine to offset revenue losses, as 60 to 70 per cent State's revenues were dependent on commercial taxes.

GMCI also called for abolition of the additional tax of one per cent introduced through an Ordinance in June last year.

Some of the other measures sought were abolishing check-posts and introduction of `green channel' for free movement of goods of reputed transporters, scientific classification of earth-moving equipment for reasonable rates of taxation, reduction in the sales tax on jewellery and precious stones from the present 4 per cent to 2 per cent and withdrawal of the 12 per cent luxury tax on electronic goods.