The Hindu : Kerala News : No major fresh taxes in State Budget

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Saturday, Feb 05, 2005

Kerala

Kerala

No major fresh taxes in State Budget

By Our Special Correspondent

THIRUVANANTHAPURAM, FEB. 4. The Kerala Finance Minister, Vakkom Purushothaman, makes no major fresh taxes or duties and takes up no major new financial commitments in the Rs.21,764.91-crore State Budget for 2005-06 presented in the Assembly today.

Mr. Purushothaman, termed his maiden Budget as a `realistic' one, prepared within the constraints imposed on him by the condition of the State finances and the uncertainties connected with the proposed introduction of the Value-Added Tax (VAT) system across the country from April 1.

The new taxes proposed by him envisage a net additional resource mobilisation of just Rs.10 crores. The additional expenditure will come to Rs.63.94 crores, of which Rs.20 crores is to rehabilitate the lottery vendors hit by the ban on lotteries announced by the Government on January 25.

One proposal is to increase the registration fee and compounding fee for luxury hotels and another is to introduce a `luxury tax' to discourage extravagance at wedding receptions and similar functions. A third proposal is to restore the stamp duty on property transactions to the level prior to its revision in December 2003, when it was brought down under the expectation that rationalisation of the duty would prevent undervaluation of the properties and thereby bring in more revenue. This expectation was proved wrong.

Concessions

On the concession side, the Budget proposes exempting rubber and coffee plantations from agriculture income tax on the share of their income for which they are liable to pay Central income tax. This concession is to avoid double taxation on the same income and is expected to cause a revenue loss of Rs.2 crores to the State.

Referring to the fiscal strain faced by the State, Mr. Purushothaman said salaries and pensions consumed 91 per cent of the revenue receipts and 70 per cent of the revenue expenditure in 2003-04. Salaries and pensions have been going up at an average annual rate of 11 per cent and 18 per cent respectively over the last 10 years.

He said contributory pension scheme would be introduced for all employees joining after April 1, this year, to prevent the outgo under the head of pensions from going out of hand. The Union Government and several other State Governments had already done this, he added. In his speech, he made no mention about the salary revision for the State employees, which had become due in March 2002.

Legislations

The Budget proposes a series of legislations to restructure the taxation system to attune it to the VAT system. Mr. Purushothaman noted that the Empowered Committee on VAT had allowed the States to exempt up to 10 items of special importance to the respective States from their VAT legislation. The Budget proposes compensating exporters for the tax required to be paid by them on their inputs under the VAT regime. The rate of tax on tea will be retained at four per cent because of the problems faced by the tea industry. The tax on rice and wheat, which are staple food items, will be retained at one per cent.

Gesture

As a gesture to small traders, the Budget proposes that they need pay tax only at the rate of one per cent for their annual turnovers of between Rs.5 lakhs and Rs.50 lakhs.

The annual Plan size is pegged at Rs.5,369.81 crores and the capital outlay at Rs.590.19 crores. Fresh borrowing to the tune of Rs.5,066.04 crores will be required to finance the Rs.21,870.26-crore Budget. The revenue deficit is expected to touch Rs.4,072.27 crores and the overall deficit Rs.997.18 crores. He said he expected a decent growth rate of 6.5 per cent during the year.

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