Shifting from an industry-centric to social sector-centric budget, Gujarat government announced reduction in the Value Added Tax (VAT) on imitation jewellery, aviation turbine fuel (ATF) and isabgul, among others. On the other hand, with the technical textile industry getting bigger in the state, the same was brought under tax purview.
While it was previously full exempted from the tax network, the government has decided to impose five per cent VAT on technical textile. The levy is estimated to increase the state's tax revenue by an estimated Rs 80 crore.
Technical textile used in industries like building construction, civil engineering, furniture, household textiles, floor coverings, automobiles, shipping, railways and packaging. The raw material used in its manufacturing are artificial materials like plastic, nylon, resins, rubber, metal, among others.
From the existing five per cent, VAT on imitation jewellery has been reduced to one per cent to maintain the employment as well as to sustain the industry, Saurabh Patel, minister of finance, Government of Gujarat announced in the state budget presented on Tuesday.
The minister further said, "As a result of this proposal, the tax revenue of the state will be reduced approximately to the extent of Rs 5 crore."
Even while the Gujarat's population growth rate in 2011 decreased as compared to 2001, the government fully exempted oral contraceptive pills from the existing five per cent VAT levied on it, resulting in reduction in the state's tax revenue to the extent of Rs 1 crore.
In a bid to boost, intra-state air connectivity across all cities in Gujarat, the state government has proposed to reduce the tax on Aviation Turbine Fuel (ATF) from the current 30 per cent (for duty paid ATF) and 38 per cent (for bonded ATF) to five per cent when sold from cities other than Ahmedabad and Vadodara for scheduled commercial airlines service flights. This exemption, Patel added, will reduce the tax revenue of the state by an estimated Rs 6 crore.
The government has also decided to totally exempt the isabgul processing industry from the present five per cent to retain the foreign exchange and the agro processing activities involved in the industry. This, the minister added, will result in reduction in tax revenue of the state by an estimated Rs 7 crore.
In order to encourage use of khadi (hand-woven cloth) and to avoid the tax burden on purchase of cotton roving, which is used to manufacture khadi cloth, the state government has proposed refund of the tax paid on the existing five per cent tax on cotton roving. This, according to Patel, will reduce Gujarat's tax revenue by approximately Rs 1 crore.
However, given the proposed increase and relief in taxes, the overall surplus of budget estimates for the year 2015-16 stood at Rs 184.95 crore for Gujarat government.