The Gujarat budget, which will be presented by finance minister Vaju Vala on Friday, will reveal whether local taxes will provide some relief in these inflationary times. For the state government, 2011-12 could be the last financial year to earn huge revenues through Value Added Tax (VAT) as the Goods and Services Tax (GST) is likely to be implemented from the next year.
In case of the union budget, it could be a populist one as three states in the country are going to polls this year. For the union finance minister, the most immediate challenge is to control rising inflation. Industry and trade bodies are ready with their wish lists and expectations from both the finance ministers. This is what they have to say:
Naishadh Parikh, ex-chairman, CII
Till last year, Gujarat government did not receive any compensation from the Centre for waiving off Central Sales Tax. So, last year the state government levied 2% tax on transfer of any stock or consignment. But this year, the Centre has paid the compensation so the 2% tax levied on transfer of any stock should be removed.
Also, the state's revenue is growing at a fast pace. But on the other side, VAT rates here are among the highest in the country. To curb rising inflation, Gujarat government should remove the surcharge tax of 4% or additional tax of 2.5% on VAT which was levied earlier.
In case of the union budget, we are expecting the finance minister to announce some good news on the GST front.
Madhur Todi, chair, Young Indians
In April 2012, the Centre wants to implement direct tax code, and hence, it may not bring any drastic changes in this union budget. I expect that the finance minister will increase the limit in Sec 80C of the Income Tax Act and will also hike the tax slab.
We are also expecting the finance minister to extend Software Techno Parks of India (STPI) scheme of tax exemptions for another year. This will help the IT industry of Gujarat.
For the state budget, we don't have many expectations. VAT rate may not be lowered as the government loses huge revenue due to prohibition on liquor sale. I am also not expecting any tax relief.
Bhagyesh Soneji, chairperson, ASSOCHAM regional office, Ahmedabad
The state government retains 2% from the Input Tax Credit of tax paid on purchases from registered dealers in Gujarat if the goods purchased or the goods manufactured out of such local purchases are sold on interstate sale basis to parties outside Gujarat state.
The provision relating to deduction from input tax credit must be withdrawn immediately as it's counter-productive so far as industrial growth in the state is concerned. It also amounts to deviation from the principles of VAT.
The levy of purchase tax on the goods procured by an SEZ developer/unit from a Domestic Tariff Area (DTA) unit situated in Gujarat defeats the very purpose of encouraging the setting up of an SEZ and related units. The SEZ developer/ unit will also have to absorb the tax burden themselves, which ultimately makes them uncompetitive in the international market. The policy is also against the universally accepted adage that 'while exporting goods or services, local taxes should not be exported'.
We therefore strongly suggest that exemption from levy of purchase tax be provided in case of procurement/purchase of goods by the SEZ developer or units from the DTA unit situated in the state. This would not only encourage development of more SEZs in the state but also augment exports from the state while making SEZs more competitive in the international market.
