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TAX PROPOSALS: Now I come to tax proposals. 273. Tax income is needed for governance and development. Even, Smruthies (Ancient Indian Codes) Stressed the need for colleting tax to promot development. Our ancient code implied that "The Taxes should be collected from the people in such a way that the Honey Bees colect the nectar from the flowers." Our government is also guided by this principle. Affordable sections who can bear a littile bit of burden are to be taxed and we propose to spare the poorer sections. In addition, I propose to simplify collection methods to prevent harassment to the honest tax payer. COMMERCIAL TAXES:
VALUE ADDED TAX:
274. Sir, though the revenue under the Value Added Tax system in force in the State for the past two years has come up to our expectation, it needs further improvement. Though most of the trade and industry have improved their tax compliance, certain dealers are still lacking in this regard. The Government intends to take strict action against them and increase revenue to the State. For this, it is proposed to bring in necessary amendments in the law and administrative measures.
RELIEFS 275. Representations from the associations of trade and industry requesting several tax exemptions, reductions and other concessions have been received. I propose to consider a few requests that are possible in the limited space available to the State to make modifications in the Value Added Tax system introduced in the State as per the consensus of all States. 276. Accordingly, I propose to continue tax exemption on rice, paddy, wheat, products of rice and wheat and pulses which are used by common people for one more year. 277. Further, I propose to reduce tax to 4% from 12.5% on- (1) rubber tyres and tubes of tractors, (2) software licences and (3) used motor vehicles.
278. I propose to add a few more goods to the list of industrial inputs and capital goods taxable at 4%.
279. I propose to exempt purchases of developers of special economic zones and units located there. 280. I also propose to, (1) permit contractors under composition tax scheme to collect tax, (2) fix minimum amount for issue of tax invoice for sales, (3) reduce penalty for delay in filing of monthly returns, (4) permit digital signature on tax invoices, (5) increase the limit fixed for audit of accounts, (6) reduce the penalty fixed for non-maintenance of correct accounts, (7) give deduction to the main contractors on amounts payable to sub-contractors, (8) modify the rate of input tax rebate on petroleum products and inter-State stock transfers, (9) permit Cost Accountants to audit accounts of dealers and (10) permit dealers engaged in more than one business to opt for composition scheme.
RATIONALIZATION MEASURES: 281. To simplify payment of tax and to make tax administration more effective, I propose to bring in certain rationalization measures. The details of these measures are at Annexure-II.
282. I also propose to levy tax at 20% on molasses, ethyl alcohol, denatured spirit and rectified spirit on which levy of excise duty has legal disputes.
SALES TAX: RELIEF:
283. I propose to permit issue of self declaration towards purchase of diesel at concessional tax of 4% for captive power generation.
ENTRY TAX: RELIEFS: 284. I propose to exempt tax on entry of goods returned which were sent outside the State on inter-State sales and stock transfer.
285. I also propose to reduce entry tax to 1% on crude oil brought by the refinery owned by ONGC and located at Mangalore in the State.
PROFESSIONS TAX: RATIONALISATION MEASURES:
286. I propose to provide for deduction at source and payment to the department of professions tax payable by, (1) employees working on contract basis by the persons availing their services, (2) owners of commercial vehicles by persons who have taken them on rent, (3) horse owners, jockeys and bookies by race clubs and (4) visiting medical practitioners by hospitals and nursing homes visited by them.
287. I also propose to provide for submission of annual return by self employed persons and permit one application for registration by employers having multiple business premises.
ADDITIONAL RESOURCE MOBILISATION MEASURES:
288. I propose to bringing the following classes of persons under the tax net.
(1) Contractors providing vehicle parking services (2) Massage parlours including Ayurvedic massages (3) Selling Agents, consultants and brokers of used motor vehicles (4) Persons acting as agents of companies (5) Income tax assessees not specified in professions tax schedule.
289. I also propose to withdraw tax exemption on persons running education institutions and tutorials.
ENTERTAINMENTS TAX: RELIEFS:
290. I propose to reduce, (1) tax payable by multi system operators from 10% to 6% and (2) tax payable by owners of amusement parks from 20% to 10%
291. In order to protect the declining theatre art, I propose to exempt entertainments tax levied on admission to dramas.
LUXURY TAX: RELIEF: 292. As in most of the other States, I propose to levy tax only on actual amounts of room rent collected by hotels.
293. I propose to bring in suitable amendments to the provision providing levy of tax on luxuries provided in hospitals to remove ambiguities.
294. Consequential Amendments: The relevant tax laws need amendments to implement the above proposed measures. These amendments together with other amendments for rationalization will be moved.
LOTTERY: 295. Currently, paper lotteries and online lotteries including internet lotteries are being organized in the State. It is the desire of the people and the Government that these should not be continued in the interest of the society and poor people. Accordingly, I propose to abolish all kinds of lotteries in the State from the next financial year and declare the State of Karnataka as ‘Lottery Free Zone’. There will be a loss of about 250 Crore rupees to the State because of ban on lotteries. I hope to make up this loss by strengthening tax collection measures. The Government is also aware that many people who survive by selling lottery tickets would become unemployed. I assure that they will be given preference under ‘Karnataka Suvarna Kayaka Scheme’ in case they come forward to undergo training in skill development.
EXCISE296. For the year 2006-07, a total revenue of Rs.4400 crores is expected from Excise Department. Out of this, 1905 croes of revenue, that means 43% of the total revenue is coming from arrack sector only.
297. However Streeshakti Swasahaya Sangha, Dalitha Vimochana Sangha, Dalitha Sagharsha Samithi and other Organisations and a few Grama Panchyaths have been strongly agitating for abolition of sale of arrack. Therefore inspite of this substantial revenue, considering the ill effect of consumption of arrack on the society, particularly on the socially and economically backward people, the Government deems it fit to respond to these demands. Although there will be a great set back to the revenue to the Government, for the welfare of the backward and weaker section of society, I propose to abolish the sale of arrack in the entire State with effect from 1-7-2007.
298. The Government is aware of its increased responsibility in view of abolition of arrack. The anti-social elements are likely to take un-due advantage of the situation arising out of abolition of arrack and engage in illegal activities like illicit distillation, manufacture, transport and sale of spurious liquor. It would be difficult for the excise department alone to handle such hazardous activities. Therefore in order to effectively control such a situation, I propose to entrust specific responsibilities on Excise and Police officials to control the offences committed under the Excise offences as follows;-
(a) the Excise offences committed by the licensees or authorised persons under Karnataka Excise Act and Rules are controlled, detected, investigated and charge sheeted in the Court of law by the officials of the Excise Department and (b) the Excise offences under the Karnataka Excise and Rules committed by the persons other than licence holders and un-authorised persons are controlled, detected, investigated and chargesheeted in the Court of law by the officials of the Police Department.
299. In order to effectively control bootlegging, Police Department has to take special responsibilities. Therefore, I propose that, Police Department should chalk out a special program to take action under the Karnataka Prevention of Dangerous Activities of Bootleggers, Drug-Offenders, Gamblers, Goondas, Immoral Traffic Offenders and Slum Grabbers Act, 1985, to book bootlegger who are engaged in the manufacture of illicit liquors. Accordingly to facilitate the Police Department to deploy special staff and to equip with additional vehicles and other communications, I propose to allocate Rs. 25 crore. Similarly I propose to earmark Rs.25 crore for Excise Department to provide additional staff, vehicles and other communications.
300. To create awareness among the general public about the dangerous effects of consumption of illicitly distilled arrack and spurious liquor, help of institutions like Streeshakti and other non governmental agencies, religious institutions, Grama panchayaths would be availed. To give wide publicity by the department through audio, visual, electronic and print media, I propose to earmark Rs.10 crores.
301. I am aware that a number of families, who are employed in the sale of arrack may not immediately get suitable employment. Our Government has introduced a programme called “ Suvarna Kayaka”, wherein one lakh persons will be trained in functioning industries. During the period of training, stipend is also given. We have taken a decision to give preference to worker displaced on account of prohibition of sale of arrack.
302. At present
through 15,248 shops, arrack is being sold throughout the State. With
effect from
303. The Government is not granting Bar (CL-9) licenses for the last several years. There is great demand for these licenses. Therefore Bar (CL-9) licenses will be issued to hotels as per demand for such licenses under the existing rules only. After taking such measures, further serious action will be taken to control the practice of open drinking by the road side CL-2 shops.
304. All the existing licenses issued under the Karnataka Excise ( Sale of Indian and Foreign Liquors) Rules, 1968 for sale of IML will be renewed as per the present rules only.
305. I propose to abolish the permit fee of Rs.50/- levied under the Karnataka Excise Act, for grant of permits to transport of IML and spirits with effect from 1-4-2007. I also propose to simplify the procedure for grant of transport permits.
306. I propose that, in the interest of the health of the Consumer and to prevent the sale of un authorisedly manufactured liquor in the name of authorised manufacturers, all liquor and spirits confiscated to Government will be destroyed.
307. To rationalise, I propose to abolish the levy of fee on Rectified spirit, Denatured spirit and Denatured anhydrous alcohol (ethanol) supplied to oil companies for the purpose of mixing with petrol. This proposal will come into force with effect from 1-4-2007.
308. In order to rationalise, I propose to simplify the existing procedure for declaration price of liquor.
309. I propose to dis-continue the litre fee levied on the liquor imported from outside India .
310. I propose to make provisions in the rules to permit the transfer of CL-6A (Star hotel licence) licences just like CL-2, CL-7 and CL-9 licenses.
311. I propose to increase the licence fee levied in case of Retail Shop (CL-2), Clubs (CL-4), Occasional licences (CL-5), Star Hotel ( CL-6A), Hotel and Boarding Houses (CL-7) and Refreshment Rooms (Bar) (CL-9) licences as given in Annexure-3. These rates will come into force with effect from 1-7-2007.
Stamps and Registration: 312. I propose to introduce suitable e-stamping system in the State on pilot basis.
313. Government had in the Budget speech for 2006-07 announced that action would be initiated to develop a methodology to guaranty Title to the property. In pursuance of this, I propose to extend concession of 0.5% on Conveyance Deeds backed by valid Title Insurance policy, issued by an Insurance Company recognized by Insurance Regulatory and Development Authority.
314. Computation of stamp duty on Awards, Trust Deeds involving Transfer of property, Development Agreements and Power’s of Attorney for development of commercial and residential properties will now be made on the market value of the property and necessary amendments will be made to Article 11, 54, 5 and 41 respectively of the schedule to Karnataka Stamp Act 1957 and include them in the ambit of Section 45A of the Act
315. An explanation will be added to Article 5 of the Schedule to cover a power of Attorney given along with an Agreement to Sell and treat the same as deemed possession of property.
316. A ceiling limit of Rupees Five lakh on the stamp duty will be fixed for Deposit of Title Deeds under Article 6(1)(b) of the schedule to Karnataka stamp Act 1957,executed for the purpose of development of immoveable properties for commercial use and Rupees Fifty thousand for the purpose of Residential use and advalorem rate for any other purpose.
317. Article 14 of the Schedule to Karnataka Stamp Act 1957 prescribes duty for Cancellation Deeds executed previously. However duty for cancellation of certain deeds have already been prescribed in the concerned Articles themselves. Thus there is a necessity to except these Articles from the residuary Article 14. This anomaly is being corrected. 318. Anomaly in Article 20(4) in respect of “Amalgamation” of Companies is removed and a new provision will be made to levy Stamp Duty on Amalgamation of Subsidiaries with parent companies and De-mergers, to prevent evasion.
319. Definition of family in Article 28 relating to “Gift” Deeds and Article 48 relating to “Settlement” Deeds is extended to Brothers and Sisters.
320. I propose to fix the Stamp Duty on different kinds of Development Agreements under Article 5(f) and corresponding Power’s of Attorney under Article 41(ea) at slab rates, on the market value of property, with a cap of Rupees One lakh fifty thousand.
321. Anomaly in Article 45(a)(i) and (ii) of the schedule to the Act in respect of Release Deeds will be rectified to prevent misinterpretation and evasion of duty.
322. In order to provide better service to the public and further strengthen the existing initiatives, I propose to constitute Kaveri Monitoring Cell. I also propose to establish Data storage and Disaster management Center at Bangalore and Dharwad for storage and preservation of permanent records.
323. The Changes proposed are detailed in Annexure - 4. TRANSPORT DEPARTMENT 324. It is proposed to mobilize additional revenue of Rs. 75 crores by enhancing the tax on various class of vehicles as under:-
325. Two wheelers and Motor Cars are being taxed on ‘Life Time’ basis. The registration of these classes of vehicle is increasing day-by-day at an alarming rate and it is causing air-pollution and traffic problems. In order to discourage the increasing number of registration of these vehicles, it is proposed to levy higher rate of tax on these vehicles.
326. Vehicles are given Temporary Registration, so as to facilitate to proceed to the registering authorities for permanent registration. So far it is not provided in the Schedule to levy tax on the vehicles temporarily registered. It is proposed to levy a small amount of tax on them separately. 327. It is proposed to enhance the tax on the Contract Carriages, both ordinary & luxury vehicles.
328. The tax on Campers Van is being levied on the basis of the floor area of the vehicle. These are used like sleeper coaches and seaters Therefore it is proposed to levy enhanced rate of tax on campers van. 329. It is proposed to enhance tax on multiaxled and articulated vehicles to bring it to the level prevailing prior to 1-4-2006. 330. At present there is no separate clause in KMV Rules for sleeper coaches. It is now proposed to amend the relevant Rules so as to provide for the registration of sleeper coaches for ensuing budget year. Therefore, it is proposed to levy tax on these vehicles separately.
331. It is proposed to enhance the rate of tax on the vehicles run by obtaining Special Permits.
332. Tourist Vehicles are being taxed at a higher rate in the neighbouring States. Therefore it is proposed to enhance the rate of tax on these vehicles.
333. Keeping in view of the administrative difficulties caused in the collection of quarterly rates of taxes on the Goods Vehicles having a gross laden weight of more than 1500 Kgs but less than 3000 Kgs, it is proposed to levy tax on these vehicles on ‘Life Time’ basis.
334. It is proposed to enhance the rate of tax on the Private Service Vehicles obtained by the companies on lease basis. 335. It is proposed to enhance the tax rates in respect of Tourist Vehicles from other States that ply in our State for 7 days & 30 days basis in Part-B Schedule. The enhancement proposed is comparable with the rates of taxes that are being levied by neighbouring States. 336. The changes proposed are detailed in the Annexure-5 Revised Estimates 2006-07
337. The Revised
Estimates of total receipts are Budget Estimates 2007-08
338. The total
receipts are expected to be 339. Government expects to raise Rs.26691.17 crore in tax revenue and Rs.1857.10 crore in non tax revenue. in addition, government expects to raise Rs.1990.71 crore as total loans from the Central Government and Rs.1200.00 crore from RBI and other Financial Institutions. 340. The Revenue Surplus and Fiscal Deficit for 2006-07 RE is Rs. 2831.54 Crore and Rs. 5371.85 Crore which is 1.46% and 2.77% of the GSDP. The Revenue Surplus and Fiscal Deficit for 2007-08 BE is Rs. 1626.66 Crore and Rs. 6304.98 Crore respectively which is 0.74% and 2.87% of the GSDP. This is as per the Karnataka Fiscal Responsibility Act, 2002. dñs·X yâ}âQ %zâ˵ÖÉâç{â¶[ Ýê©ùpâ°Àâªyê ¥ÀæeÁ ¸ÀÄSÉà ¸ÀÄRA gÁdÕB ¥ÀæeÁ£Á ZÀ »vÉà »vÀA £ÁvÀä¦æAiÀÄA »vÀA gÁdÕB ¥ÀæeÁ£ÁA vÀÄ ¦æAiÀÄA »vÀA
Kautilya our ancient Indian thinker and economist in his famed "Artha Shastra" says. "The Kin (in the modern context those who run the state administration) should take people's happiness as his happiness. The people's interests as his (King's) interest, And to such work which is in the interests of the people, not according to his will and wish.
341. Kautilya's words are our guiding principle. We have kept aside our self-interests and have strived to protect the interests of all sections of our society and promote all round development of the State. 342. Sir, I feel very fortunate to have presented the second budget of our coalition government. I have the satisfaction of having responded to the aspirations of the people of our great State. Our second budget has tried to address the problems of the poor, the oppressed, and the weaker sections of our society. We have used this occasion to make our land, language, arts and culture blossom. Our budget is rich as it is full of resources. Our Budget is dependable as it has been presented within the bounds of fiscal discipline. 343. At the beginning of sarvajeet samvatsara I convey my heartiest wishes for a happy ugadi to all the citizens of Karnataka and all the members of this august body. 344. I now commend the Budget Estimates 2007-08 for the consideration and approval of the House. The full budget would be discussed on the floor of the House. The Government will then seek approval of the full budget. I now seek a vote on Account for a period of four months ending 31st July 2007. Jai Hind Jai Karnataka
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