Excerpts From Part Ii Of The Maharashtra Finance Ministers Speech

While presenting the budget in March last year for 1997-98, an uncovered deficit of Rs. 88.48 crore was anticipated. The revised estimates reveal a surplus of Rs. 597 crore largely due to prudent financial management, efforts for investment in small savings and better tax collection. Now, after taking into account the actual opening deficit of Rs. 307.97 crore, this surplus will reduce to Rs. 289.03 crore.

80. The Budget Estimates, 1998-99, anticipate a deficit of Rs. 846.29 crore as shown below:

Out of this deficit, I propose to make good Rs 600 crore by way of various resource mobilisation proposals which would result in the reduction of the deficit to Rs. 246.9 crore. Gearing up of the tax collection machinery during the course of the year and tightening up various economy measures especially on the non-Plan side, would, I expect, mean a further net addition of Rs 200 crore to our resources. This would result in the reduction of the deficit to Rs 46.29 crore. I propose to leave this deficit of Rs. 46.29 crore uncovered for the present.

 

81. Tax policy:

It will be useful to set down the principles which have guided my efforts while framing the tax proposals. I believe in the first instance that the procedural restrictions should be reduced to the extent possible. The primary aim of the tax proposals is to raise revenue. But equally, the proposals should act as catalyst for generating economic growth. Tax rates have to pass the test of reasonableness. Tax systems have to pass the test of implicity. Tax administrations have to pass the twin tests of efficiency and fairness. Finally, if there is an atmosphere of trust, the tax payers participation in raising revenues becomes meaningful.

82. Voluntary registration:

Registration under the Bombay Sales Tax Act can be obtained only by that dealer who has effected a certain minimum turnover. It has been represented to me that new entrants to business who desire to obtain registration are often unable to do so because of the restrictive condition. I, therefore, propose to introduce a scheme of Voluntary Registration.

Under the proposed scheme, any person who wishes to obtain a certificate of Registration will be able to do so on depositing a prescribed amount of advance tax. The advance tax will be adjusted against the future tax liability. I do hope that this will make it easier for people to join the stream of trade.

83. Regular registration:

At present, a dealer is compulsorily required to obtain registration if his turnover exceeds Rs 1.25 lakh. I propose to double the existing limits. This will enable a large number of small traders to be free from the requirement of registration.

84. Liquor served in permit rooms:

The State Excise on liquor is collected on an ad valorem basis. Accordingly it has been decided to exempt liquor from sales tax. The ad valorem levy of State excise on liquor is with reference to the maximum retail price printed on the bottle. However, when liquor is served in permit rooms, the price charged to the customers is clearly in excess of the maximum retail price. I have therefore decided to levy sales tax on liquor including beer served in permit rooms. The applicable rate of tax in four and five star hotels will be 20 per cent while for liquor served in other permit rooms, the applicable rate will be 18 per cent.

85. Restaurants:

Restaurants are taxed at concessional rates under a slab system. I have found it necessary to adjust the tax rates to an extent. I, however, do not propose to change the basic structure of the exemption notification.

86. Manufacturers set-off:

In 1995, at the time of introduction of VAT the rate of input taxation on manufacturers was reduced from 6 per-cent to 2 per cent. I now propose to increase the rate to 3 per cent. For certain types of products, the rate of input taxation was reduced nil in 1995. I now propose to abridge the list of industries eligible for such concession.

87. Sugar, textile and tobacco imported from abroad:

Under an agreement between the Union government and the State Governments, the Union government levies an additional duty of excise on sugar, textile and tobacco manufactured or produced in India. The proceeds of the duty are distributed amongst the States. On their part, the State Governments do not levy any tax on sales of these commodities. However, the additional duty of excise is not levied on sugar, textile and tobacco imported from abroad. The State Governments do not get any share from the countervailing duty of customs which is levied by the Union Government on the import of such commodities. But, even imported sugar, textile and tobacco are exempted from Sales Tax. Such a state of affairs is clearly not equitable. I, therefore propose to levy tax at the rate of 4 per cent on sugar, textile and tobacco imported from abroad. This will aIso provide desirable protection to local industry.

88. Branded flour, atta and maida:

Flour, atta and maida are of course free of tax. However, the affluent sections of society tend to purchase the branded varieties of these products. There is no reason why such consumption should remain untaxed. I, therefore, propose to tax these commodities when they are sold under brand name at a low rate of 4 per cent.

89. Credit card:

The Bombay Sales Tax Act was amended last year to provide for an extra levy of sales tax at the rate of 1 per cent in respect of any sale made against a credit card. The credit card companies as well as the credit card holders have requested that the discriminatory levy be done away with. I have decided to accept the request. I, accordingly propose to delete the provision regarding the extra tax on credit card sales.

90. Set-off to manufactures of tax-free goods:

Ordinarily set-off is allowed to manufacturers of taxable goods. Traditionally manufacturers of tax-free goods have not been authorised to claim set off of the taxes paid on their purchases. This has resulted in diversion of trade to an extent as these manufacturers tend to procure their consumables and raw materials from other States. I now propose to grant set off of the tax paid in excess of 4 per cent to these rnanufacturers.

91. Purchase of capital assets:

It is true that ordinary manufacturers are eligible to claim set-off of the tax paid on their purchases including purchases of capital assets. However, the manufacturers are required to wait till the time of assessment before they can actually claim such set-off. This results in blocking up of funds to a very substantial extent. I therefore propose to introduce a new declaration form which will enable the manufacturers to purchase capital assets at the concessional rate of 4 per cent.

92. Fourth copy of the chalan:

The sales tax rules were amended to provide that the tax payer will have to submit a fourth copy of the chalan to his Assessing Officer immediately on payment of tax. It has, however, been represented to me that this casts an unjust burden on the regular tax payers. I therefore, propose to remove the requirement. This revision will come into effect from 1st April, 1998,

98. Annual return:

As per the present provisions dealers are required to file an Annual Return with the assessing authorities. Different trade associations have represented that the period provided for filing of such return is too short. I now propose to provide that the Annual Return should be filed within six months instead of three months. This should give the business community sufficient time to collect the relevant data and figures.

94. Amendment of rules:

Because of different Court judgements, certain facilities earlier available to local manufacturers have been taken away. In particular these problems arise regarding interpretation of expressions such as export sale and double set off. I propose to suitably amend the rules so as to remove the extra and unnecessary burden cast on the assesses.

95. Fees for appeal:

The rules regarding the fees which may be charged on appeals have been recently revised. I have been told that the revised fee structure is perhaps a bit heavy on the smaller tax payers. I propose to reduce the minimum fee for filing of an appeal from Rs 100 to Rs 50.

96. Intangible goods:

The Supreme Court has clarified that it is open to the State Government to levy tax on the sales of intangible goods such as import licences, trade marks etc. Accordingly the Sales Tax Act has been amended from time to time to specify certain intangible goods to be liable to tax. The question whether the non-specified intangible goods are liable to tax, thus remains open. The Government has no intention to tax intangible goods unless they are specified. I accordingly propose to provide for a full exemption to all intangible goods upto the time they are specified to be liable to tax.

97. Settlement Commission:

The Sales Tax Act was amended in 1995 to provide for the constitution of a Settlement Commission. The Commission has not been established so far. I am, now, proposing to set up a Committee to consider all the issues relating to the Settlement Commission. After the report of the Committee is received, it should be possible to take a final decision in the matter.

98. Life Saving Drugs:

The Bombay Sales Tax Act authorises the State Government to notify certain drugs to be Life Saving Drugs. The drugs so notified are exempted from payment of tax. It is necessary to revise such list from time to time so as to take cognizance of new drugs and new remedies. I, therefore, propose to constitute a Committee to examine the issue. The committee will also have medical experts as members. After the recommendations of the Committee are obtained, a fresh list of Life Saving Drugs will be notified.

99. Value Added Tax:

Traders having turnover in excess of Rs. 40 lakh are liable to pay VAT. It was announced in the last Budget that the limit will be brought down to zero. However, it will first be necessary to discuss the issue with the Trade in order to devise a simple composition scheme for the retail trade. I propose to hold such discussions in the near future.

100. Kerosene and Petrol Gensets:

Diesel gensets already carry the low rate of tax of 4 per cent. It has been pointed out to me that because of the high rate of 13 per cent, the local commercial users of kerosene and petrol gensets tend to purchase these items from other States. With a view to promote local trade, I now propose to reduce the applicable rate of tax to 4 per cent.

101. Lubricating Oil:

I propose to reduce to 4 per cent the rate of tax applicable to sales of lubricating oil made to the Maharashtra State Road Transport Corporation.

102. Village Industry:

Since 1994, Village Industries certified by the Khadi and Village Industry Commission or Board are entitled to full exemption from tax for turnover up to Rs. 12 lakh. I have reviewed the matter. It is necessary to grant further incentives to village industries. I have, therefore, decided to uniformly prescribe the limit of Rs. 20 lakh for all types of village industries. For food processing units, the limit will continue to be Rs. 50 lakh.

118. Writing Instruments:

I will not like to forget my student friends. Although most of the items needed for the students such as books, exercise books etc. are free of tax, writing instruments such as ball-point pens, fountain pens etc. are taxed at 4 per cent. Keeping in view the fact that this is the season of examinations, I propose to exempt fully writing instruments costing up to Rs. 30 and their parts and components.

119. Intra-Ocular Lenses:

Intra-ocular lenses are used during cataract surgery. They are permanently implanted inside the eyes. Thousands of people get the gift of sight because of these lenses. At present these lenses are taxed at 8 per cent. In view of their intrinsic importance, I propose to reduce the tax rate to 2 per cent.

120. Dental Care:

It is often said that prevention is better than cure. This is no where as true as in dental care. Early dental treatment is likely to prevent most of the future complications. With a view to promoting the cause of dentistry, I propose to reduce the rate of tax applicable to some dental equipment from 13 per cent to 4 per cent.

121. Ayurvedic Medicinal Plants:

All over the world, experts have recognised the importance of the indigenous systems of medicines. These are the products which have been recognised by historical cultures as products capable of mitigating diseases. A very large number of people, especially those in the poorer strata of the society, rely on these medicines. It is necessary to promote these products. I, therefore, propose to exempt sales made by nurseries of Ayurvedic medicinal plants.

123. Chemist and Druggist:

A special composition scheme had earlier been offered to the retail chemists. Their Association has pointed out that some of their members could not apply for the composition scheme in time, as the relevant notifications were not noticed by the Trade. I propose to consider sympathetically the request made by the Association. Suitable amendments will be made in the rules to take care of the problem.

124. Idols of National Leaders:

It is proper and desirable that the images of the national leaders should always be in our view. This may help us to tread with even greater determination, the path of justice and progress. I propose to exempt from the levy of tax the sales of statues representing different national leaders.

125. Declaration in C Form:

Inter-State sales made to registered dealers in other States carry the low rate of tax of 4 per cent. In order to claim such concession, the selling dealer is required to procure declarations in Form C from the purchasing dealer in the importing State. The local trade and industry have been representing that such C Forms are not issued in the required numbers by the purchasing dealers. Because of the non-availability of C Forms, assessment are held up and the number of appeals increases. Besides, considerable man power is wasted in trying to procure these Forms from other States, I propose to solve this problem by introducing a new procedure. It will now be enough if a single C Form is obtained in respect of the inter-State transactions. A new procedure will be devised to give effect to this concession. I am sure that the local trade and industry will welcome this positive step on behalf of the State Government.

126. Works Contract Tax:

The Works Contract Tax was amended in 1992 so as to provide an exemption to those goods used in Works Contracts. on which sales tax had been earlier paid. This has clearly lessened the burden of tax on contractors. The amendment has not however led to simplification of procedure or ease of calculation. I therefore propose to remove the amendments made in 1992. At the same time, I propose to introduce a new attractive composition scheme. I expect that the change in the burden of tax would not be significant. However, the new scheme should make accounting and assessment a very simple affair.

127. Luxury Tax on Tobacco:

A Luxury Tax on tobacco and tobacco products is levied in the State at 5 per cent. In view of the deleterious effects of tobacco on human health, it is necessary to discourage its consumption. I therefore propose to increase the rate of Luxury Tax on tobacco from 5 per cent to 8 per cent. The increase in consumption of Gutka containing tobacco on which additional excise is levied is causing concern in all sections of society. I therefore propose to levy luxury tax at 20 per cent on the product.

128. Profession Tax:

Profession tax is being levied in the State since 1995. The proceeds of the tax are used exclusively for funding the Employment Guarantee Scheme. In view of the social objectives to be achieved, it has become necessary to revise the rates of Profession Tax. I have however taken care not to make any change in the rate of tax applicable to the employees in the lowest tax bracket.

129. Electricity Duty and Sales Tax on Electricity:

The Honble members are aware that since October 1996, Electricity Duty and Sales Tax on electricity are being charged on an ad-valorem basis. On reviewing the issue, I find that the fuel adjustment charges and demand charges are not treated as price for the levy of duty. Such charges are indisputably a part of the cost of electricity and should be treated as such. I, accordingly, propose to amend the relevant Acts, so as to modify the concepts of Consumption Charge and Energy Charge.

130. Stamp Duty:

It has been noticed that in many instances stamp duty is not paid on the original instrument. At the time when the instrument is required to be produced before different authorities, true copies are produced. As the law stands today, duty cannot be levied on true copies. I propose to close the loophole by providing for recovery of duty on true copies if duty has not been paid on the original document. Debt instruments are central to the development of the capital market. The stamp duty on such instruments is already very low. However in order to increase the flow of funds into the capital market, I propose to put a ceiling of Rs. 1,000 on the duty payable.

131. Betting Tax:

Horse racing is clearly a luxury of the rich. Betting Tax is at present levied at different rates on different types of bets. It is perhaps desirable that people who stake large amounts on horses, should also contribute a little more by way of tax for schemes of social welfare. I therefore propose to revise upwards the rates of betting tax. The new rates will come into force from the 1st April. A suitable notification is being issued in this behalf.

132. Entertainment Duty: Cable Operators:

Entertainment Duty is levied on the cable TV operators since December 1992. The present duty rates are fairly high. The cumulative burden of duty is of the order of 35 per cent. It has been represented to me that the burden is excessive. I find substance in such claim. If any concession is to be offered, then in order to maintain the present revenue level, it will be necessary to broad base the levy. I have accordingly decided to amend the law so that consumers such as co-operative housing societies, housing colonies, hotels, lodges, restaurant etc. which offer service of cable T . are brought under the tax net. The duty rate applicable in Municipal Corporation areas will be Rs. 15 per month per TV For A and B Class Municipal Council Areas, the rate will be Rs. 10. In the rest of the State the rate will be Rs. 5. I do hope that there will be improved compliance because of the very substantial reduction in the duty rate.

133. Entertainment Duty: Water Sports:

Water sports are a new entrant in Maharashtra. Although the entertainment duty applicable to amusement parks is 15 per cent, I propose to levy such duty on water sports at the rate of 10 per cent so as to win the affection of children between the age of 8 and 80. I have also decided to fully exempt new water sports activities for the first 3 years and provide exemption of 50 per cent for the next 2 years.

134. Resource Mobilisation:

An interesting suggestion has been made to me by a Chamber of Commerce and Business. It has been stated that the State Government may appoint a well represented Advisory Counsel for Finance and Industry. The Counsel can advise the Government on simplification of procedure and suggest ways to raise resources. I am of the firm opinion that trade and industry should be consulted while formulating the economic and industrial policies of the State. I, therefore, propose to set up an Advisory Council of Business to advise the Government on issues relating to taxation and simplification of procedure. I also propose to seek advice from the committee on the intractable problem of abolition of octroi.

135. Conclusion:

I have in view ideals such as elimination of poverty, creation of employment opportunities, removal of inequalities and the spread of knowledge while presenting this Budget. The forces of nationalism have now stormed their way to New Delhi. This ancient land can draw on its experience and wisdom and rise to meet the challenge of the coming century. It is beyond doubt that the next century will be most momentous in human history. More wealth and more knowledge will be created in the next hundred years than has been created in the entire history of mankind. I am certain that with self confidence and nationalist forces leading the way, India will be a torch bearer in the next century. On this background my Budget should prove to be creative and nourishing.n