237. As mentioned earlier, in the current year there has been a very healthy growth in the revenue from the State’s Own Taxes. This has been made possible by an almost unprecedented growth in revenue from Commercial Taxes which form a major portion of our tax revenue. This growth could be attributed to the higher growth in the economy, the earnest efforts of the departmental officers in collecting revenue and the complementary role of the trade and industry.
238. We have taken a series of initiatives in the current year to facilitate compliance to tax laws. As announced last year, provisions have been made for electronic submission of returns and furnishing of information and also for payment of taxes online. The trade and industry have responded wholeheartedly to these reform measures and I would like to thank them for their support and co-operation. I intend to consolidate these initiatives in the coming year. In this direction, I propose to bring in provisions enabling electronic filing of applications for registration and furnishing of information under various commercial tax laws. I expect the trade and industry would welcome these also. As regards Goods and Services Tax (GST) our stand has been that the fiscal autonomy of the States should not be compromised.
VALUE ADDED TAX
239. I have continued the tradition of having constant dialogue with trade and industry and have examined their suggestions for simplification of tax laws and rules as well as prevention of trade diversion. Keeping in view, their representations and interests of the common man and the farmers and also in the interest of the State, I propose the following reliefs and reform measures under Value Added Tax.
(1) Tax exemption on paddy, rice, wheat, pulses and products of rice and wheat will be continued for one more year from April, 2011.
(2) Coconut (excluding copra) will be exempted from tax.
(3) Tax on barbed wire will be reduced from 13.5 per cent to 5 per cent.
(4) De-oiled rice bran will be exempted from tax.
(5) The price limit fixed for school bags for the benefit of reduced tax of 5 per cent will be increased from Rs. 200 to Rs. 500.
(6) Tax on all kitchen utensils will be reduced from 13.5 per cent to 5 per cent.
(7) Tax on caps will be reduced from 13.5 per cent to 5 per cent.
(8) Tax on leasing of feature films and sale of copy rights relating to feature films will be exempted.
(9) The benefit of refund of tax paid on purchases will also be extended to multilateral financial institutions like the Asian Development Bank.
(10) The period of validity of stay orders of the Appellate Joint Commissioners regarding disputed tax will be increased from 120 days to 240 days.
(11) The time limit for taking up assessment and re-assessment will be reduced from 5 years to 4 years.
(12) The turnover limit for compulsory audit of accounts of dealers will be increased from 60 lakh rupees to 1 Crore rupees.
(13) The provision requiring contractors to file copies of individual contracts will be abolished.
(14) The penalty for clandestine transport of goods taxable at low rates will be increased.
(15) The rate of interest for delay in payment of tax will be increased from 15 per cent per annum to 18 per cent per annum.
240. I propose to align the VAT rate on declared goods with the maximum rate specified on such goods under the Central Sales Tax Act.
Additional Resource Mobilization Measures under Value Added Tax.
Additional Resource Mobilization through VAT
241. In order to meet our increasing developmental expenditure, I have always insisted on improving our tax collection efforts rather than increasing tax rates or imposing new taxes. But, because of various development schemes which I propose to take up, some additional resources are necessary. Any tax increase should be only on those who can afford to pay such increased tax. Accordingly, I propose to take certain measures to raise additional resources that are required for the general benefit of the State. I propose to increase,
· VAT on jewellery and articles of gold and other noble metals, precious and semi-precious stones from 1 per cent to 2 per cent.
· VAT rate on goods currently taxable at 13.5 per cent to 14 per cent.
Additional Resource Mobilization Measure under Betting Tax
242. I propose to increase the composition amount payable in respect of totalisator tax by Bangalore Turf Club from 4 per cent to 8 per cent.
243. From above additional resource mobilisation measures, I propose to mobilize a sum of about Rs.500 Crores.
Entertainments Tax – Relief
244. I propose to exempt distributors of feature films from registration.
Luxury Tax – Relief
245. I propose to provide for payment of composition amounts in lieu to regular tax by home-stay units.
246. The above measures necessitate amendments to the provisions of respective tax enactments. These amendments together with other amendments for rationalization will be placed before the house for consideration and approval.
For the year 2010-2011, I had set a target of Rs 7500 crores
without any increase in the rates of taxes. I am happy to announce that
the Department would surpass this target by over Rs 700 crores and the
likely revenue for the year 2010-11 would be Rs 8200 crores. The
Karasamadhana Scheme-3 proposed during
248. I propose to increase the rates of Additional Excise Duty by 10 per cent to 20 per cent across all the 17 slabs. I also propose to increase the Declare Price slabs by Rs. 25 across all the 17 slabs as per the Annexure -2. With the increase in the rates of Additional Excise duty and strict enforcement measures, a revenue growth of about 12 per cent over the year 2010-11 is expected and a revenue target of Rs 9200 crore is proposed for the year 2011-12.
249. In order to effectively tackle the problems of illicit distillation, duplicate liquor etc., it is proposed to modernise the Department by providing Wireless, GPS, fire arms and modern vehicles. Computerisation upto the Range level (Taluk) would also be completed. A Technical Committee would look into the issues like transit wastage, maturation loss, mechanical application of Excise adhesive labels, production of alchohol out of Sugar Beet, Jaggery, etc.
Stamps and Registration
250. With the economy picking up, the revenues from stamp duty and registration fee have shown a positive trend in the year 2010-11. In the year 2010-11, revenue of Rs. 3700 crores is expected as against the revenue of Rs.2,818 crores realised during the year 2009-10.
251. In the year 2011-12, the department would focus on increasing collection efficiency while at the same time ensuring that the tax collection system is made more transparent and taxpayer friendly. For streamlining the procedures, to plug the leakage in revenue and to enhance the revenue collections the following measures are being proposed.
252. I propose to give relief in stamp duty and registration fee payable on documents executed in connection with:
· the Tourism Policy of the state;
· the non-agricultural loans advanced to the joint liability groups by the scheduled banks and other financial institutions approved in this behalf;
· the allotment of developed lands to the farmers or the purchase of lands by the farmers out of the compensation amount paid to them, when their lands are acquired for public purposes.
253. I propose to exempt the stamp duty of Rs. 10 payable on the documents presented before the notary public for attestation.
I propose to reduce the stamp duty from 1 per cent to 0.1 per cent,
subject to a maximum of Rs. 20,000 payable on agreement for sale, wherein
there is no delivery of possession of property. When a reference is made
in such agreement for sale, regarding Power of Attorney
given to the purchaser authorizing him to sell the property, then
such agreement will be considered as Agreement for
255. In order to improve the tax compliance and mobilise additional resources, I intend to take the following measures.
256. The prevailing superfluous and ambiguous provisions relating to Joint Development Agreement (JDA) and Power of Attorney (POA) for Joint Development, in the Karnataka Stamp Act will be omitted.
257. The stamp duty will be reduced from 3 per cent to 2 per cent in respect of the transfer of property and the stamp duty will be increased from 0.7 per cent to 1 per cent on the transfer of shares, involved in the process of merger and demerger of companies.
258. Payment of consolidated stamp duty on brokers’ notes, insurance policy bonds and receipts will be provided.
259. A fixed stamp duty of Rs. 50 will be levied on Powers of Attorney executed by principals or clients in favour of agents or brokers for operating trading and demat accounts in respect of capital market issues and other related issues.
260. A fixed stamp duty of Rs.1000 will be levied on the following:
· for trust constituted exclusively for the public, religious and charitable purposes;
· for trust constituted for the purpose of management and custody of the properties and where there is no transfer or disposition of property in any way.
261. Stamp duty will be levied at 6 per cent on trusts, other than public, religious and charitable trust, wherein there is a transfer or disposition of property in any of the following ways:
· from the owner of the property to a trust,
· from one trust to another trust or trustee or beneficiary,
· from trustee to trust or trustee or beneficiary.
262. From the aforementioned proposals, an additional revenue of Rs.300 crores is expected to be realised.
263. In order to bring the above proposals into effect and to further improve the quality of services rendered by the Department of Stamps and Registration, the relevant Acts and rules, will be amended comprehensively.
The changes proposed are detailed in
MOTOR VEHICLE TAX:
265. During the year 2010-11 the revenue collection is estimated to reach Rs. 2400 crores as against the collection of Rs. 2032 crores during the year 2009-10. During the year 2011-12 Rs. 2800 crores estimated to be collected. It is proposed to allocate a sum of Rs. 20 crores every year for Urban Transport Fund announced ealrier, to be collected by raising the cess from 10 per cent to 11 per cent (as shown in Annexure - 4)
Additional Resource Mobilisation
266. With revision of various tax rates and procedures it is expected to generate Rs.1,020 Crore additional resources.
Amendment to Karnataka Fiscal Responsibility Act
267. Hon’ble Members may recall that the State Government had taken Economic Stimulus measures in view of the economic slow down during the year 2008. On advice from the Government of India, this august House has permitted higher fiscal deficit of 3.5% during 2008-09 and 4% in 2009-10 by suitable amendment to Karnataka Fiscal Responsibility Act. I am happy to announce that the fiscal deficit in those years was limited to 2.88% and 3.24% only, even while providing the economic stimulus.
268. The Thirteenth Finance Commission has recommended a road map for bringing the Central and State Finances back to the fiscal reforms path. During the current year, economic growth has revived and it has had a positive impact on the tax collection. However, a sudden decrease from the fiscal deficit of 4% allowed during 2009 to the normal level of 3% during 2010-11 may lead to sharp contraction in the public spending. Recognizing these practical difficulties, the Finance Commission had recommended that the year 2010-11 could be a year of transition. As a result, Government of India had advised State Government to limit the fiscal deficit to 3.44%.
269. Finance Commission has also recommended specific goals for outstanding debt and enhancement of transparency in Medium Term Fiscal Plan. Appropriate incorporation of these recommendations in the Karnataka Fiscal Responsibility Act has been made as a condition by Government of India for release of State specific grants recommended by the Finance Commission and for waiver of certain debts. Considering this advice from Government of India, I propose to seek approval of the house for amendment to Karnataka Fiscal Responsibility Act to align it with the recommendations of the 13th Finance Commission.
Revised Estimates 2010-11
270. As per budget estimates for the year 2010-11 total receipts were estimated to be Rs.68,564 crores. As per revised estimates total receipts are Rs.65,258 crores. As per budget estimates total expenditure was estimated to be Rs.70,063 crores. Now, as per revised estimates total expenditure is Rs.72,277 crores.
271. As per the revised estimates, revenue surplus would be Rs. 1,595 crore and fiscal deficit would be Rs. 11,700 crore. Fiscal deficit would be 3.07 % of the GSDP.
272. During 2010-11 Budget the State Plan was fixed at Rs.31,000 Crore. As per revised estimates, it is expected to be Rs.31,050 Crore. As compared to the achievement of Rs.26,944 crore during the previous year, the plan achievement during 2010-11 is more by 15.2%.
273. In 2010-11 budget it was estimated to generate Rs.36,228 Crore from State’s Own Taxes. Through efficient and effective measures it has become possible for the Government to collect Rs.38,049 Crore surpassing the revenue target. Compared to the previous year this amount is higher by 24.4%. In addition, Rs.425 Crore will be collected in the form of Cess.
Budget Estimates 2011-12
274. Total receipts are expected to be Rs. 83,729 crore for the year 2011-12. It includes Rs. 66,313 crore of revenue receipts and Rs. 17,416 crores of Capital Receipts. Total expenditure is estimated to be Rs.85,319 crores, consisting of revenue expenditure of Rs.65,034 crore and Capital Expenditure of Rs.20,285 crore.
275. During 2011-12 Revenue Surplus is estimated to be Rs.1,279 crore. During 2011-12 Fiscal Deficit is expected to be Rs.12,482 crore, which is 2.87 % of GSDP.
276. As a result of the above mentioned proposals of exemptions and actions for tax collection, additional resources of Rs.1,020 crore is to be realized. The State’s total own tax revenue for the year 2011-12 is estimated to be Rs.43,817 crore.
277. Rs.3,675 crore is expected to be collected from Non-tax revenue. During 2011-12, Rs.8,402 crore is expected by devolution and Rs.10,419 crore is expected by grants from Government of India. Including Rs.15,354 crore from borrowing, the total capital receipts is expected to be Rs.17,416 crore.
278. 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.5,772 crore from their internal resources and borrowings during the next year.
279. 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 3.44% by amending the specific provisions of the Karnataka Fiscal Responsibility Act, 2002. Accordingly, the necessary amendments are being tabled before the august House.
280. While presenting the 2011-12 Budget Estimates for the consideration of the august House, I seek the approval for Vote on Account to incur expenditure up to 31st July, 2011 as per the Budget Estimates.