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I now go to the tax proposals. COMMERCIAL TAXESSales TaxReduction in Taxes and Rationalisation of Rates1. The thrust of my tax effort in this Budget has been two-fold. First, to reduce the burden of taxes on the common man by reducing the incidence of taxation. In doing so, I have ensured that commodities of mass consumption, inputs and raw materials, commodities that impact the rural economy and the poor as well as consumables are brought under lower tax rates. I have tried to bring as many of the common man’s commodities as possible under the 1% and 4% tax rates, while continuing exemptions to some of these commodities. Thus I have reduced the taxes on as many as 125 commodities and 43 types of works contracts. This will entail revenue loss of about Rs. 100 Crore, which I propose to offset through better enforcement and improved tax compliance. 2. Second, rationalisation of tax rates by reducing the number of rate slabs from the current level of 14 rates to 7 rates. There are at present 9 basic rates, which I am reducing to 4 rates. Most of the commodities are being brought under the basic rates of 4%, 8%, 12% and 16%. Only a few select commodities are being brought under the special rates of 1%, 20% and 28%. I propose to abolish the special rate of 17.5%. The list of commodities, the tax rates of which would be modified under this proposed regrouping is furnished in Annexure – II and Annexure VI. Reliefs and Concessions
3.
The trade and
industry have made representations for several tax reliefs and
concessions. It has been possible for me to consider some of their
requests. I propose to exempt tax on certain commodities including
raisins, kardi seeds etc. The details are given in 4. I propose to exempt resale tax on cellular phones to encourage better tax compliance. 5. On the question of double taxation on rough granite stones and polished granite stones, the industry has sought retrospective relief. I propose to give suitable relief to this industry. Rationalisation and Administrative Measures6. I propose to simplify tax administration and encourage better compliance. The details of these measures are at Annexure IV. 7. The lower tax rates in the neighbouring States on certain high value commodities has resulted in trade diversion. To correct this situation, I propose to reduce the tax on certain commodities listed in Annexure – III.
8.
In addition, with a
view to make our enforcement efforts more effective and to improve tax
compliance, Additional Resource Mobilisation Measures9. In order to mobilize additional resources, I propose to,
Review of Notifications:10. Currently, there are many notifications extending tax concessions on specified goods and to specified persons. I, propose to review the same and continue only those, which are necessary and withdraw the others. VAT Implementation11. As part of the National consensus on VAT implementation, the State is fully prepared to introduce Value Added Tax from 1st April, 2005. We have taken all preparatory steps in this direction. We hope that the Government of India will spell out clearly its commitment to help the States during the initial stages of introduction of VAT. 12. I also propose to:
· Provide the facility of online filing of returns and payment of tax by dealers in Bangalore. · Simplify Tax remittance by providing for collection of Taxes through the network of State Bank of India and its associate banks and where there is no network of the SBI or its associates, through other banks approved by RBI. This will be operationalised from 1st October, 2004. 13. To effectively check leakage of revenue and also prepare the ground for effective implementation of VAT, I propose to computerize all the checkposts and inter-link them with the assessment offices of the department, which would ensure faster and online exchange of information relating to movement of goods. 14. I propose to abolish four intermediate checkposts at Manuganahalli (on Mysore-Hunsur Road), Tadas Cross (near Hubli), Hospet and Harihara, and convert them into mobile checkposts. . 15. I propose to announce a scheme of deemed acceptance of returns filed for the assessment years upto the year 2002-03 under Sales Tax and Entry Tax Acts, based on the returns filed by dealers subject to certain specified conditions. 10% of the above cases would be selected on random basis for detailed scrutiny assessment. Central Sales TaxReliefs16. I propose to reduce tax on inter-state sale of plastic woven sacks, laminated woven sacks and copper rods to 1% to encourage sales from our State. Entry TaxReliefs17. I propose to, provide for set-off of central sales tax paid by consumers against entry tax payable on motor vehicles brought from outside the State, retrospectively. Rationalisation Measure:18. I propose to provide specifically for retrospective levy of tax on motor vehicles brought from outside the State to remove doubts. 19. I propose to introduce a new enactment providing for levy of tax on high value goods brought into the State at the same rate as the sales tax rate to prevent trade diversion and protect the local trade and industry. Entertainment TaxReliefs20. I have carefully examined the representations made by the film industry. Considering their requests, I propose to reduce entertainment tax on films to 40%. Additional Resource Mobilisation Measures21. I propose to levy entertainment tax on admission to live telecast of horse races in the turf clubs. 22. I propose to reduce the current tax exemption limit of Rs.250 in respect of admission to entertainments other than cinematographic and video shows held in Bangalore Urban Agglomeration and City Municipal Corporation limits, to Rs.50 per head. Professions TaxReliefs23. I propose to, · Introduce an amnesty scheme for recovery of all arrears for the period ending 31st December, 2003. · Introduce a self-assessment scheme for small employers. Rationalisation Measures24. I propose to facilitate filing of returns and also assessment under Professions Tax by employers with their jurisdictional sales tax office. Betting TaxRationalisation Measures25. I propose to fix the composition amounts payable in respect of horse racing at the rate of 4% of the stake money. 26. I propose to provide for levy of interest for delayed payment of Betting Tax. Luxuries TaxAdditional Resource Mobilisation Measures:27. I propose to reduce the current tax exemption limit of Rs.400 per day for hotels and lodging houses to Rs.150 per day and revise the luxury tax rates as in Annexure -VIII. 28. I also propose to withdraw the benefit of levy of luxury tax on actual charges collected and restore the old taxation system. 29. I also propose to levy tax at 8% on accommodation and other luxuries provided in hospitals, therapy centres and the like where the charges are more than Rs.1000 per day. The proposed Additional Resources Mobilisation measures under Commercial Taxes would yield about Rs. 150 crores. 30. Consequential Amendments: The above measures necessitate amendments to the provisions of respective tax laws. These amendments together with other amendments for rationalization will be placed before the House for consideration and approval. EXCISE31. I do not propose any change in the Excise duty or the license fee structure on Indian Made Liquors. Efforts will continue to be made to improve enforcement against tax evasion and for better compliance. 32. Major reforms are necessary in the arrack trade. There is considerable loss of revenue to Government because of the rampant menace of non-duty paid arrack. Combined with illicit manufacture of arrack, illegal sachet machines and large number of unauthorized arrack shops, the loss to the State exchequer is very heavy. 33. I propose a radical change in the arrack policy to eliminate the problem of non-duty paid arrack. This new policy will be based on the following principles: · Rectified spirit and denatured spirit for all uses will be fully canalised through the state owned Karnataka State Beverages Corporation Limited to prevent misuse and diversion to unathorised uses. · Removal of the price defferential between the market price of non-duty paid arrack and administered price of arrack by reducing the Excise duty per bulk litre of arrack from Rs. 20 to Rs.2 and shifting the levy to the point of manufacture. This rationalisation will eliminate the incentive for seconds. · Liberalising arrack manufacture to make it market driven such that the supply of arrack is not the responsibility of the Government but rather the function of demand and supply in the market. · Allowing the market demand and supply forces to determine prices rather than Government administering the prices of Rectified Spirit and Arrack. Government will only put a ceiling on the Maximum Retail Price of arrack. · Putting in place third party inspections to certify quantities and quality of rectified spirit and arrack. 34. This new policy will be implemented with strong enforcement measures to make the excise administration transparent, accountable and to significantly enhance excise revenues to the State. I expect these reforms to bring about Rs. 300 Crore additional revenue to the State exchequer. 35. The sale of toddy through societies is permitted in certain taluks of Gulbarga and Raichur. In the absence of enough toddy trees in these areas, spurious toddy made by using chemicals is endangering the health of the local people. It is also causing considerable loss of revenue. For these reasons, I propose to withdraw the permission for sale of toddy in these two districts. STAMPS AND REGISTRATION36. I do not propose any changes in the Stamp duties or registration charges. The process of full computerisation and steps to improve service delivery through reforms in this sector will be continued. The Central Valuation Committee has already notified revised guideline values for registration of properties in Bangalore city. Similar revision of guideline values will be completed and notified for the other major cities of Mysore, Mangalore, Hubli-Dharwad, Belgaum, Gulbarga and Davangere. This process will be completed before December 2004. MOTOR VEHICLES TAX
37.
I do not propose any
changes in tax rates except for one. At present, luxury cars, jeeps and
utility vehicles costing more than Rs. 10 lakh are being taxed at 10%. 38. The programme for computerisation of Regional Transport Office will be extended rapidly to include all major cities in Karnataka during the current year. Steps will also be taken to improve the quality of service delivery. NON-TAX REVENUES39. The performance on non-tax revenue mobilisation has been far from satisfactory. There is, therefore, a need to review the rates of non-tax levies in all sectors, streamline the administrative arrangements for effective collection and enhance non-tax revenues in a sustained manner. The recommendations of the Revenue Reforms Commission on non-tax revenues will be examined for expeditious implementation. Online and Internet Lotteries40. There has been a growing demand in all walks of life to ban online and internet lotteries. It is my conviction that Government should not promote such lotteries. This is also a part of the Common Minimum Programme. Respecting the sentiments of the people of Karnataka and to fulfill our promise I have terminated the agreement that Government of Karnataka had signed with the online lottery operator on 22nd May 2002. This termination has taken effect from 15th of July 2004. 41. It is necessary to take strong action to eliminate online and internet lotteries in Karnataka. I therefore propose to ban all online and internet lotteries with immediate effect. Karnataka will be declared as an “online and internet lottery free zone”. With this, we would have fulfilled the aspirations of the people. 42. There will be a loss of about Rs. 250 Crore to the State exchequer as a result of this ban. I hope to make up this shortfall through other tax rationalisation measures. REVISED ESTIMATES 2003-04
43.
The Revised
Estimates of total receipts are BUDGET ESTIMATES 2004-0544. The total receipts are expected to be Rs. 32065.99 Crore comprising revenue receipts of Rs. 25510.31 Crore and capital receipts of Rs. 6555.68 Crore. The total expenditure is likely to be Rs. 31591.88 Crore of which revenue expenditure is estimated at Rs. 25437.48 Crore and capital expenditure is estimated at Rs. 6154.40 Crore.
45.
Government expects
to raise Rs. 14957.96 Crore in tax revenue and Rs. 4486.35 Crore
in non-tax revenue. In addition, Government expects to raise
46.
Honourable Members
would be pleased to know that for the first time after a gap of 8 years, I
am commending a budget with a revenue surplus of
47.
Taking into account,
the opening balance of A CLEAR VISION48. Our vision is clear and our targets precise. Karnataka’s all-round development is our goal. Our objective is to progress on the path of economic reforms with a firm foundation in social justice. The challenge is of making hard decisions while at the same time fulfilling the people’s aspirations. It is our resolve to ensure that promises are fulfilled. Let us walk towards a brighter Karnataka. 49. I now commend the Budget Estimates 2004-05 for the consideration of the House. The entire budget will be discussed on the floor of the House. I now seek the approval of the full budget for 2004-05. "Jai Hind – Jai Karnataka"
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