Annual plan 2003-04
Though the State Government suffered large shortfalls in revenue in 2002-03, we were able
to adhere to our Plan targets. I had hoped to achieve a Plan outlay of Rs 8,611 crore in
2002-03. We have achieved Rs 8,421 crore as per revised estimates which is about 98 per
cent. Given the adverse conditions of drought and overall resource shortfall this is a
matter of satisfaction. I have enhanced the Annual Plan outlay to Rs 9,780 crore in
2003-04. This is a growth of about 16 per cent over revised estimates of 2002-03.
The growth in outlays for key sectors over 2002-03 has been significant. I may mention
Agriculture and allied services (18 per cent), Rural Development (43 per cnet), Irrigation
(8 per cent), Social Welfare and Women and Child Development (8.5 per cent), Education (22
per cent), Water Supply and Sanitation (33 per cent), Housing and Urban Development (15
per cent).
Tax proposals
I now go to the tax proposals.
Commercial taxes: We are on the threshold of a paradigm shift in sales
tax reform. With effect from April 2003, Karnataka will introduce Value Added Tax (VAT),
an internationally accepted non-cascading, fair, equitable and transparent tax in place of
sales tax. Sir, the Karnataka VAT Bill is before the legislature. This bill will
provide the legislative frame work for VAT. From being a mere tax collector, the tax
administration will now be transformed into a responsive, service oriented agency. My
Government has taken all steps to make this transition from sales tax to VAT, smooth and
successful.
Sir, our likely revenue loss during the first year is expected be about Rs 750 crore.
Government of India has stood by us in tax reform efforts and is expected to fully
compensate the revenue loss in the first year of introduction of VAT. The revenue loss
compensation will be 75 per cent in the second year and 50 per cent in the third year.
Under VAT as specified in the Karnataka VAT Bill, commodities fall under three
major categories.
Goods of necessity like fresh vegetables, fruits, coarse grains, manual agricultural
implements, etc., exempt from tax are listed under first schedule. Petrol, diesel,
Aviation Turbine Fuel, sugarcane and lottery tickets which are sought to be continued
under the present sales tax system are also in this schedule.
Rectified Spirit and liquor including Beer, Fenny, Wine and Liqueurs will continue under
the Excise Act. Goods of mass consumption like safety matches, edible oil, bread,
mechanical agricultural implements, identifiable raw materials and declared goods will be
taxable at 4 per cent and are listed in the third schedule.
All the remaining commodities are taxable at a standard rate. As agreed by all the States
such standard rate, Sir, would be 12.5 per cent. Certain commodities are exceptions
to this tax of 12.5 per cent and are taxable at 1 per cent and 20 per cent. The
commodities taxable at 20 per cent are all demerit goods and in line with the national
consensus, I propose to deny input tax credit to them.
I propose to levy VAT on textile, sugar, tobacco and tobacco products after the State
Government is permitted to do so, at appropriate rates keeping in view the tax rates
adopted by other States and also the interests of our trade and industry.
Sir, under VAT we have to notify the industrial inputs and packing materials taxable at 4
per cent. Similarly the list of IT Products taxable at 4 per cent VAT also needs to be
notified. Sir, I would like to emphasise here that introduction of VAT would not and
should not lead to increase in prices of goods. Though a few commodities would bear a
higher tax than the present tax, because of lower tax on most of the commodities, the
total tax on a basket of goods of a common consumer would be lower than the present tax.
This is because the Revenue Neutral Rate under VAT is 15 per cent as against 12.5 per cent
that we are proposing to adopt.
Sales tax
Tax exemption: Sir, as mentioned by me earlier, I propose to retain Petrol, diesel,
Aviation Turbine Fuel, sugarcane and lottery tickets under the present sales tax system.
Petroleum products because, there is no value addition at their subsequent sale points,
sugarcane because it is taxable at purchase point and lottery tickets because of the
complexity in determining its taxable value. I propose to exempt all other commodities
from sales tax.
Reliefs:
I propose to reduce sales tax to 4 per cent on Avgas sold to flying schools to revive and
encourage them. I also propose to reduce sales tax to 4 per cent on ATF and Avgas used by
regional airlines connecting new regional destinations to encourage them to expand their
operations and provide air connectivity to important tourist and industrial centers in the
State. In particular, I would look forward to regional air services commencing operations
to destinations such as Mysore, Hubli, Bellary, Hospet, Gulbarga and Belgaum.
|
