The Hindu Business Line : Karnataka: Reconsider sales tax hike on IT industry, says Moily

THE former Chief Minister and Chairman of the Tax Reforms Commission, Mr Veerappa Moily, has suggested the Karnataka Finance Minister, Mr S. Siddaramaiah, to reconsider his decision to increase the sales tax rate on information technology industry from five per cent to 12 per cent.

He was speaking on the State and Union Budgets at a function organised by St. Aloysius College here on Thursday.

Mr Moily said that taxation system should not affect industry development.

The State Government is earning revenue to the tune of Rs 3,000 crore from this industry, and increase in tax rate may pave way for its migration from the State. This, in turn, may bring down revenue to the State.

Mr Moily was hopeful that Mr Siddaramaiah might consider revising this.

Congratulating him for presenting an agriculture-focussed budget, he said that the Budget should have given stress on aspects such as investments and infrastructure development.

The State Government is registering an annual turnover of around Rs 18,000 crore at Electronic City in Anekal taluk of Bangalore, because of the creation of good infrastructure there.

The Budget has also given less attention on investments in the State.

Stating that the growth rate of the service sector is more than any other sector, Mr Moily said nearly Rs 89,000 crore could be collected as service tax in the country. He felt that the States might not have any problem in implementing value-added tax (VAT), if they are authorised to tax service sector.

Implementation of VAT will pave way for one-level tax, leading to reduction in prices of commodities. All cascading effects of the multi-point tax system will go in this system.

Highlighting the need for reforms, he said aspects like e-governance would lead to reduction in cost and improve the quality of work.

The country has to make use of the knowledge base properly, he said, adding that human resource capital is the biggest capital ever endowed to any country.

Mr Moily said the growth rate of middle class is the real indicator of the development of the country, and stressed the need for doubling per capita income in the next 10 years.

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