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Sunday, 25 March 2012

Born again: budget & tax High-end levy and return of entry fee DEVADEEP PUROHIT


http://www.telegraphindia.com/1120324/jsp/frontpage/story_15289661.jsp#.T23aC2ES3ko

Born again: budget & tax 
High-end levy and return of entry fee

DEVADEEP PUROHIT
Calcutta, March 23: The big news is Bengal has a budget for the new financial year and it has proposed tax increases.
The news in fine print is there is not much of a fine print to pore over: no clarity was on offer on how deep or shallow a hole the proposals will drill in your pocket.
Finance minister Amit Mitra, who presented the Mamata Banerjee government's first full budget today, is hoping to collect around Rs 200 crore extra in taxes in 2012-13.
But Mitra's budget documents did not provide details of his projections on higher earnings except express his intent to raise tax on a few luxury items and introduce a new levy — local area entry tax — to create a compensatory entry tax fund.
"I give him 100 for presenting a budget like this," Mamata said in a post-budget news conference, asked how much she would give Mitra on a scale of 1 to 10.
The generosity made Mitra smile as the chief minister's statement made it clear that in her assessment, he had passed with flying colours on his full-budget debut. Last year, Mitra had presented a vote-on-account budget in June and an "annual financial statement" in August.
However, several questions crop up if the finance minister's budget is compared with what he had claimed on those two occasions. Mitra has fallen short of mobilising tax revenues and meeting his target on capital expenditure (money spent to build assets).
Lower than projected collection of own tax revenues — Rs 24,934.04 crore against a target of Rs 27,690 crore — means the government has failed to meet the revenue buoyancy goal in all spheres: land revenue, stamp and registration fees, state excise, sales tax, taxes on vehicles and electricity duty.
A departure from the promised capital expenditure — from Rs 6,856.68 crore to Rs 3,885.86 crore — is an indication that the government has spent less in creating capital assets, which contribute to long-term development.
"The targets could not be met because of the prevailing economic situation. The estimates were drawn up considering a GDP growth of around 9 per cent, which could not be achieved…. The impact of this was reflected in the Union budget as well," Mitra sought to explain when Mamata deflected the question on the mismatch in projections and reality to her cabinet colleague.
The failure in 2011-12, however, has not dampened the spirit of Mitra, who is hoping for a 30 per cent rise in revenue collection in the new financial year. He is also planning a 11.56 per cent hike in plan outlay, pegged at Rs 23,371.44 crore in 2012-13.
But the Opposition is not convinced. "These projections are absurd as the finance minister has not given any roadmap on how to achieve the targets," said Surjya Kanta Mishra, the leader of the Opposition in the Assembly.
As the finance minister of a debt-ridden state with a low tax mop-up in comparison to other states, Mitra didn't have many options to boost revenues unless he marshalled the courage to follow former railway minister Dinesh Trivedi, who dared to raise fares but had to resign.
So, the former Ficci secretary-general chose to lay emphasis on better tax compliance to realise his revenue targets. From announcing an amnesty scheme for traders to get registered with the commercial tax directorate to doing away with unnecessary paper work while filing tax returns, Mitra announced several measures to encourage dealers to step forward and fill the government's coffers.
He also proposed the introduction of a lifetime tax on registration of vehicles while retaining the existing provision of paying taxes every five years.
"These days, people change their cars every four to five years and so I am not sure whether people will accept this scheme. Besides, the government will have to give incentives to popularise the scheme, which will result in revenue losses," said a senior government official.
The sole contentious proposal in his speech was reintroduction of entry tax, the proceeds of which the government would use to build roads and provide better transport facilities with the objective of creating a congenial business atmosphere. The budget speech, however, did not specify what the finance minister meant by "tax on entry of goods into local areas of the state".
In public finance literature, an entry tax — which the Left had abolished — is regarded as regressive in nature as it raises prices and leaves scope for corruption at the points the tax is collected.
Both Mamata and Mitra, however, clarified that the entry tax will not have any inflationary impact. However, none of them could come up with a definite reply on whether exemption of empty LPG cylinders from value-added tax would result in a saving on a family's monthly fuel cost.
Tea gardens have received a breather because of an exemption from two heads of cess, which is expected to help the organised industry in Bengal save Rs 12-15 crore a year.
The finance minister announced lowering of taxes on paneer and sticks used for making kites. "The attempt was to present a budget without causing any hardships for the common man," said the chief minister.
The relief for kite-makers aroused some curiosity but sources later said a delegation had sought such a relief. Small kite-making units dot the state.
Mamata batted for the finance minister in justifying the 1 per cent rise in taxes on some luxury items — cars priced above Rs 10 lakh, televisions costing more than Rs 25,000, watches worth more than Rs 15,000 and mobile phones exceeding Rs 20,000.
"Those who can buy such high-value items can pay taxes," said Mamata, hailing the tax proposals.
She also praised the budget for incorporating several proposals to fund schemes for minorities and backward classes.

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