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BUDGET SPEECH 09-10 Tax Proposals 



Tax Proposals

260. In the Budget of 2008-09, the States Own Tax Revenue was estimated to be Rs.31876 crore. Because of the various reasons stated already, a shortfall of Rs..3111 crore is expected in tax collection. This type of shortfall in the collection of taxes not only in the central taxes but also in the tax revenue of several States is a reflection of the national economic conditions. In spite of such conditions the States tax-revenue in the year 2008-09 is expected to be about 10.7% more than the tax revenue of the year
2007-08. I would like to say that this reflects efficient performance of duty of our tax departments.

Commercial Taxes

261. It has been estimated that in the year 2009-10 the tax collection from Commercial Taxes including the Value Added Tax will be Rs. 20125 crore. In the background of the discussions held with the representatives of Commerce and Industry and also in order to give stimulus to the States economy, the following changes have been proposed in the present tax rates.

Value Added Tax

262. The State has applied value added tax, as per the agreed scheme of taxation all across the country, and therefore there is a limited scope available to the State Government to modify those rates. Exemption available on foodgrain items like paddy, rice, wheat, pulses etc. in the State would be extended for another year with effect from 1.4.2009.

The present rate of 4% will be reduced to 2% in respect of agriculture and forest produce like tamarind and shika-kai.

Rates will be brought down to 2% for Coconut and Desiccated Coconut Powder.

Rate will be reduced from 4% to 2% on arca-nut.

Tax will be abolished completely on Baje.

Tax will be abolished in respect of foot-wear costing less than Rs.100/-.

Already Armed Forces through Canteen Stores Department are being charged reduced rate of 4% in respect of 12 essential items. I propose to extend the reduced rate of 4% in respect of daily use items of toiletteries, television sets, washing machines and similar household itmes.

I intend to extend reduced rate of 4% on all kinds of tread rubber used for re-treading.

Sales Tax

263. Sales tax exemption will be provided for diesel up to 75,000 KL for use of fishermen in their boats.

Luxury Tax

264. In view of global economic downturn, Tourism and Hotel Industry has been adversely affected. Therefore, to provide boost to tourism, I intend to make the following changes in Luxury Tax.

Exemption limit for Luxury Tax will be increased from daily room rent of Rs.149 to Rs.499.

Luxury Tax will be imposed on actual rates instead of the declared rack-rate.

Luxury Tax rates will be modified as outlined below.

i) Daily room rent from Rs.500 to Rs.1000: 4%

ii) Daily room rent from above Rs.1000 and upto Rs.2000 : 6% .

iii) Daily room rent above Rs.2000 : 10%.

Luxury Tax on Marriage Hall will be reduced from 20% to 10%.

To promote trade exhibitions, Luxury Tax on Exhibition Hall will be reduced from 20% to 10%.

Profession Tax

265. In view of the necessity to provide relief to people receiving low wages, I intend to increase the Profession Tax exemption limit from Rs.5000 to Rs.10,000 a month.

266. Profession Tax is also being imposed separately on individual schools being managed by the educational institutions. I intend to provide Professional Tax exemption to school and college units upto Class-XII.

Entertainment Tax

267. Entertainment Tax will be imposed at the rate of 10% of the entry ticket value for sports events organized for entertainment involving the private proprietary teams.

268. Movies are the main source of entertainment for common man. To reduce their burden, I intend to reduce Entertainment Tax from 40% to 30%.

State Excise

269. The historic decision to ban arrack from July 2007, in view of demands from social workers, womens groups and other learned citizens, has already been implemented. In the initial stages, reverses were estimated keeping the ban in view. In the year 2007-08 revenue receipt from excise was more than the Revised Estimates also. In the year 2008-09 also, as per the target, revenue of Rs.5627 crore is likely to accrue.

270. Substantial increase in in the consumption of Indian Made Foreign Liquor (IMFL) has been noticed after banning of arrack in the State. Steps would be taken to collect higher revenue to the State from Excise. Therefore, it is estimated that revenue of Rs.6565 crore will be realized from excise sources.

271. New Wine Policy has been implemented in the State with a view to provide higher profits to grape growing farmers and to promote consumption of low alcohol wine. In the year 2009-10 government will take appropriate measures for continuous effective implementation of Wine Policy.

Stamps and Registration

272. Sale and transfer of the immovable property has witnessed downward trend in view of international and national economic crisis. In the year 2006-07 Stamps and Registration Department had collected Rs.3415.20 crores by registration of 1413185 documents. In the year 2007-08 as against annual target of Rs.3812.55 crores, Rs.3630.73 crores was collected. In the year 2008-09, Rs.2757.97 crores has been collected registering only 870578 documents, till January 2009. Till the year end, it is expected that revenue of Rs.3200 crores will be collected. There is a possibility of slight increase in the year 2009-10, keeping in view the likely economic revival. Keeping in view the needs of commercial and industrial establishments and common people, I intend to bring the following reforms and changes.

273. In view of the economic difficulties, transaction in immovable properties has got reduced, causing problems to common people in purchase and transfer transaction of agricultural lands, houses, shops, etc. This has also adversely affected the construction activity. In this context, as per the existing commitment of the State Government to the Central Government to their direction of reducing Stamp Duty to 5%, it would be appropriate to substantially reduce the same. Therefore, it has been decided to reduce the Stamp Duty from 7.5% to 6%on sale transaction of all kinds of immovable properties including agricultural land. There is no doubt that with this, lakhs of common people in the State will get substantial relief. Further, I hope that this will also help in revival of the construction industry.

274. In view of the substantial reduction of Stamp Duty, there is likely to be a shortfall of Rs. 400 crore in revenues. To partially offset this shortfall I intend to modify Stamp Duty as outlined below.

Stamp Duty of 0.25% of the value of the agreement will be imposed on all such agreements, which do not involve property acquisition in stead of Stamp Duty of Rs.10 to Rs.200/- at present.

On Joint Development Agreement, Stamp Duty at the rate of 1% of the value will be imposed as against prevailing rate of Rs.10000/- to Rs.1.5 lakhs.

Rate of 6% will be imposed as against present rate of 5% on Arbitration Award.

Under the Securetization category for mortgage, transfer registration fee will be 0.5% in stead of 1%, with a limit of Rs.10,000/-.

Fee of Rs.500/- will be charged as against Rs.50/- at present for Duplicate Registration.

Immovable Property lease

1) Up to five years - 1% on the value of the advance and average annual rent.

2) Above five years and up to 10 years 2% on the value of the advance and average annual rent.

3) Above ten years and up to 30 years 4% on the value of the advance and average annual rent.

4) For a period above 30 years 6% of the market value.

In respect of licence involving immovable and movable property tax will be imposed based on the annual licence fee and advance.

Rate of 1% on the immovable property being handed over to the developer for General Power of Attorney, and Rs.200/- in respect of other General Power of Attorney.

Transfer of Property by method of release at the rate of 6% instead of 2.5% and 3.75% at present.

275. It is proposed to bring about comprehensive amendment to the Karnataka Stamp Act, 1957 and Rules formed thereunder with a view to simplify the service being provided by the Stamps and Registration Department. The changes (Amendments) proposed are detailed in Annexure-II.

Motor Vehicle Taxes

276. Because of the significant slow down witnessed all over the country in motor vehicle markets in the later half of the year 2008-09, the collection of Motor Vehicle Taxes is expected to be about Rs.1875 crore, which is less than this years target of Rs.2218 crore. In view of the significant decrease made recently in petrol and diesel prices there is a possibility of improvement in the situation in motor vehicle markets. For the year 2009-10, collection of motor vehicle taxes is estimated to be Rs.2063 crore.

277. In this background, there is no proposal for any increase in motor vehicle tax rate. However, from the point of view of environment protection it appears to be appropriate to give significant exemption on the life-time tax in respect of electricity driven vehicles. It is proposed to decrease the taxes in respect of electricity-run motor cars, vans and two-wheelers from 8 to 12% to 4% on their selling prices. This will give a big boost to the use of environment-friendly transport vehicles.

Resource Collection

278. As a result of the above mentioned proposals of exemptions and actions for tax collection, additional resources of Rs.100 crore is to be realized, against which an exemption of Rs.400 crore would have been given. The States total tax revenue for the year 2009-10 is estimated to be Rs.32721.25 crore.

279. Besides, State-owned Corporations and Local Bodies will allocate resources to development works by raising loans from financial institutions on the basis of their repayment capacity from own resources. It is estimated that such institutions will generate resources to the extent of Rs.6604.05 crore from their internal resources and borrowings during the next year.

Legal Amendments

280. It is required to make necessary amendments in the relevant tax laws for implementing the above mentioned tax and other reform measures. Besides, in accordance with the suggestion made by the Government of India, the statutory limit of fiscal deficit needs to be increased to 3.5% by amending the specific provisions of the Karnataka Fiscal Responsibility Act, 2002. Accordingly, the necessary amendments are submitted to the Honble House.

Overview of the Budget 2008-09

281. In the background of our developmental perspective and strategies, revised estimates include following points.

Revised Estimates 2008-09

282. As per Budget Estimates for the year 2008-09 total receipts were estimated to be Rs.55273.95 crores. As per Revised Estimates total receipts are Rs.53096.81 crores. As per Budget Estimates total expenditure was estimated to be Rs.55313.41 crores. Now, as per revised estimates total expenditure is Rs.53143.91 crores. It is expected that after taking into consideration net of public account, this years final deficit would be Rs.47.10 crore. At the time of presenting 2008-09 budget, the same was estimated to be Rs.39.47 crores.

Budget Estimates 2009-10

283. Total receipt are expected to be Rs.58031.36 crore for the year 2009-10. It includes Rs.48389.04 crore of revenue receipts and Rs.9642.32 crores of Capital Receipts. Total expenditure is estimated to be Rs.58117.23 crores, consisting of revenue expenditure of Rs. 47237.67 crore and Capital Expenditure of Rs.10879.57 crore.

284. The government expects to collect Rs.32721.25 crore as tax revenue and Rs.2129.50 crore as non-tax revenue. It is expected that Rs.6061.43 crore would be raised as market borrowing and Rs.13538.29 crore would come from Central Devolution.

285. As per the revised estimates for the year 2008-09, revenue surplus and fiscal deficit would be Rs.767.47 crore and Rs.9356.89 crore respectively. It would be 0.29% and 3.49% respectively of the GSDP. For the year 2009-10 revenue and fiscal deficit are estimated to be Rs.1151.37 crore and Rs.8493.49 crore respectively. In percentage terms of GSDP these would be 0.39% and 2.88%. respectively. It would be taking into account the proposed amendments as per provisions of the Karnataka Fiscal Responsibility Act, 2002.

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286. These words said by national poet Dr.G.S.Shivarudrappa about selfless new birth and aspirations in the lines of above poem are an inspiration of protection of interests of all. Our Governments wish is also prosperity of all.

287. "We need to lend our ears to the criticism of our shortcomings, and not to admiration". This is the famous saying of Mahatma Gandhi. This is a lesson to all of us. Therefore, if there are any grievances against the administration, we assure to hear the criticism and take corrective steps. It is my sincere request that we should all forget the differences of opinion, and work as one for taking strong steps to build a strong and prosperous Karnataka.

Honble Speaker,

288. While presenting the 2009-10 Budget Estimates for the consideration of the Honble House, I seek the approval for Vote on Account to incur expenditure upto 31st July, 2009 as per the Budget Estimates.

Jai Hind

Jai Karnataka

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