The Hindu Business Line : Kerala: No new taxes in deficit Budget

WITH the elections to the State Assembly round the corner, the United Democratic Front (UDF) Government in Kerala has presented an annual budget for 2006-07 that proposes only certain changes in the value-added tax (VAT) system, but no new taxes.

Presenting the Budget in the Assembly on Friday, the Finance Minister, Mr Vakkom Purushothaman, said the levy of new taxes has been avoided in view of the recommendation of the Empowered Committee of State Finance Ministers on VAT that the rates should not vary for two or three years to allow the system to stabilise. However, some changes in the implementation of the system has become necessary for "protecting revenue and to remove certain ambiguities".

The Budget, while proposing an additional resource mobilisation of only Rs 17.34 crore, has announced additional expenditure of Rs 195.89 crore. The revenue income and expenditure for the year are projected at Rs 18,287.24 crore and Rs 23,018.94 crore, respectively, leaving a revenue deficit of Rs 4,731.70 crore. The overall deficit for the year is put at Rs 771.83 crore.

Credit to dealers

Under the VAT Act, the Budget provides for giving credit to the dealers for adjusting any excess amount payable to them by the Government under the Kerala General Sales Tact, 1963. Also, a provision has been made for advance collection of tax on evasion-prone goods. Seeking to clear any ambiguity on presumptive tax, the Budget provides that dealers opting for presumptive tax will be liable to tax only if their turnover is Rs 10 lakh or more. The procedures for registration of dealers under VAT will be simplified to ensure issue of registration within a week of the receipt of application.

The Finance Minister observed that although the rate on gold jewellery had been reduced last year, the dealers had not reciprocated by showing sufficient growth in turnover, resulting in a decline in revenues. In the circumstances, the Budget has proposed amendments to the relevant sections to deny input tax credit on purchase of bullion as also the special rebate for purchase tax on old gold jewellery.

Nevertheless, the dealers will be given an option to pay tax under a compounding system. The tax payable, if they compound, will be 115 per cent of the tax remitted in 2004-05.

Similarly, it has been proposed to make suitable amendments to the Act to provide input tax credit to pharmaceutical units in the State who opt for compounding.

In order to arrest the loss of revenue on account of major consumers buying pipes from outside the State, the Budget has proposed four per cent tax on all plastic and PVC pipes under the Kerala Tax on Entry of Goods into Local Areas Act. A similar rate of entry tax has been introduced for coconut and copra also.

Sops for tourism

The Budget has offered a slew of concessions to the tourism industry. It has been proposed to exempt hoteliers other than bar-attached hotels from tax on the sale of cooked food below Rs 5 lakh. Besides, compounding option will be extended to their entire sales turnover, provided they are second or subsequent sellers in respect of items other than cooked food and beverages prepared by them.

To encourage the houseboats industry, a compounding system for payment of Luxury Tax will be introduced. The annual compounded amount will vary for various categories of houseboats.

The agricultural Income Tax on all assessees other than companies will be abolished. The stamp duty in respect of instruments of partition taking place within the family will be reduced to Rs 1,000.