VAT increased by one per cent in the state budget

Ashish Kumar Rath & NR Sethuraman

Bangalore, March 5: BS Yeddyurappa, the chief minister and finance minister of Karnataka presented the state’s annual budget in the legislative assembly today. He increased the Value Added Tax (VAT) by one per cent across the board for all the products, in order to achieve a better tax collection. The VAT has been increased from four to five per cent for few items and 12.5 to 13.5 per cent for rest of the items.

There were no indications on the state’s adoption of Goods and Services Tax (GST), but the chief minister said that the state has to get prepared in next one year to adopt GST.

Besides VAT, the chief minister also increased the luxury tax for the hotels by two percent, where tax for the rooms with rent between Rs 1000 and 2000 will be increased from six to eight per cent, those rooms with rent above Rs 2000 will be increased  from 10 to 12 per cent . VAT on tobacco products have been increased from 12.5 to 15 per cent.

BS Yeddyurappa, the chief minister of Karnataka

The government has also proposed to levy an entry tax of one per cent on sugar from factories instead of from the distributors.

With the increase in the VAT rate, the government is aiming an additional revenue of Rs 1480 crore.

The chief minister also proposed to bring in Karsamadhan scheme for the tax payers who have not able to pay their taxes till now due to various reasons. Under this scheme, relief in respect of interest will be given to those who pay the principal tax prior to June 30, 2010.

 Presenting his fifth budget, Yeddyurappa said that there was a significant improvement in the state’s tax collection in the second half of the last fiscal.

The fiscal deficit of the state stood at Rs 9078 crore, 2.96 per cent of the Gross State Doemstic Product.

The state will spend Rs 8830 crore in order to improve primary and secondary education in the state through the centrally assisted Sarva Siksha Abhiyan.

The state’s total budget outlay has been increased to Rs 70, 063 crore from Rs 60, 051 crore. The state’s annual plan size has also increased to Rs 31000 crore from a revised estimate of Rs 25, 967 crore.

Life time tax for the motor vehicles has been increased by one to two per cent. Moreover, cars that cost. The changes in the motor vehicle taxes will bring in an additional of Rs 249 crore to the state.

The state is also expecting a revenue of Rs 36, 228 crore through tax collection.

The state has proposed to bring in 50 per cent reservation to women in village panchayats and it will make necessary amendments