Luxury goods taxes likely to increase in Delhi budget

Already reeling under escalating prices of essential commodities, there may be more bad news in store for people in the city with the Delhi government likely to announce a set of measures in the annual budget tomorrow to improve its dwindling finances.

Delhi finance minister AK Walia, who will present his seventh consecutive budget, is likely to do a balancing job to augment government's financial resources as well as not to put too much pressure on the common man, officials indicated.

To strengthen its coffers, the government will also have the option of withdrawing the Rs40 subsidy per cylinder being given to domestic consumers but officials said the possibility is very remote.

Walia is likely to increase taxes on luxury goods such as designer clothes, high-end mobile phones, pens and watches and may even consider increasing road taxes.

The government may also go for slashing subsidy to Delhi Transport Corporation and Delhi Jal Board. The total subsidy bill to both these organisations comes to around Rs1,500 crore annually. Government also has the option of withdrawing power subsidy completely.

The national capital, hosting the Commonwealth Games in October, is going through financial difficulties especially after the Centre substantially curtailed its allocation in the Union budget.

The Delhi government was allocated a meagre Rs50 crore for projects linked to the Games against its demand for a special assistance of Rs2,000 crore. The annual plan outlay to Delhi was also slashed significantly from last year's Rs2,435 crore to Rs1,228 crore for 2010-11.

In an indication of possible rise in taxes and tariffs in the budget, chief minister Sheila Dikshit last week said her government may have to take certain measures to augment its financial resources.

"We are facing a financial crisis. The Centre said they cannot give more...to overcome the crisis, the finance minister must have taken certain decisions," she had said without elaborating.

Officials involved in budget preparation indicate that allocation to various departments may also be dropped comparing to last year's allocation.

The government may also take certain measures to cut down its non-plan expenditure.

Departments like PWD and transport may see a drop in allocation as Dikshit had already said the city will not see much of construction activities in the next couple of years.

In the Rs23,043 crore budget last fiscal, the highest allocation of Rs3,069 crore was given to the transport sector followed by urban development with Rs1,524 crore.

The economic slowdown had a severe impact on finances of the city government with a fall of over Rs1,300 crore in tax collection being reported in the last fiscal.

However, revenue collection improved marginally this fiscal after government hiked bus fare, water tariff and withdrew power subsidy to certain categories of consumers, besides hiking Value Added Tax (VAT) on over 100 items.