BUDGET 2000
SPECIALS
INTERVIEWS
COMMENTARY
GOVT&ECONOMY
Y2K: BIZ FEATURES
INDIA & THE WTO
CREDIT POLICY
BIZ IN THE USA
CARS & MOBIKES
MANAGEMENT
CASE STUDY
BIZ-QUIZ
USEFUL INFO
ARCHIVES
NEWSLINKS
SEARCH REDIFF

Maharashtra budget taxes rich, but fiscal deficit zooms

The state budget for the year 2000-2001 unveiled by Jayantrao Patil, finance minister of India's Maharashtra state, in the state legislature on Wednesday proposes to levy more taxes on the rich, while offering some sops to the information technology and agriculture sectors.

The budget, however, has not done much to curb the ballooning fiscal deficit. The deficit is anticipated to be around Rs 7.5 billion for the fiscal 2000-2001.

The new taxes proposed are likely to result in the generation of about Rs 3.31 billion. However, new schemes announced by the government in the budget on the floor of the legislature will result in the state exchequer being drained of Rs 3.29 billion, leading to a final fiscal deficit of Rs 7.47 billion.

The state's finance minister has, however, cast a comparatively benevolent eye on the agriculture sector.

For the agriculture sector the government proposes to cut down the applicable rate of sales tax on drip irrigation systems, sprinklers and their parts and components from 13 per cent to 4 per cent.

Manufacturers of mixed fertilisers too will have something to cheer about, for, at the moment they are taxed at the rate of 4 per cent. This results in double taxation. The Maharashtra government has, thus, proposed to extend the benefit of full set-off to manufacturers of mixed fertilisers.

However, the government proposes to levy a tax at the rate of 4 per cent on retail packings of branded cereals and pulses - loose sales of these items will remain untouched.

The government has also announced a massive computerisation programme for the state government. It has also granted tax concessions for computer hardware, which are taxed at the rate of 4 per cent. Computer spares too attract higher tax rates. The state government has decided to prescribe a common rate of 4 per cent for all notified computer parts.

The Maharashtra government has also proposed a hike in the duty on electricity for commercial use by 1 per cent -- from 10 per cent to 11 per cent. This will result in an increase in the price per unit by 2.7 paise to 6 paise. The exemption granted to captive power plants from paying electricity duty of 30 paise per unit has been withdrawn.

The government also declared that all power licensees who sell and generate electricity to bulk consumers will be taxed. Currently, only the Maharashtra State Electricity Board or MSEB and Tata Electric Companies or TEC pay this tax.

The government is also proposing to hike the tax on industrial kerosene to 20 per cent from 8 per cent. The tax on kerosene sold through the public distribution system will be maintained at 4 per cent.

Manufacturers of bulk drugs will have to pay a higher rate of taxes. The present rate of 2 per cent has been revised to 4 per cent.

The government has decided to hike the tax on betting from 10 per cent to 20 per cent. The government is also planning a tax on bowling alleys at the rate of 1000 per lane per month.

The entertainment tax on cable television operators is sought to be hiked to Rs 30 from Rs 20 in municipal corporation areas.

The entertainment tax on A and B class municipal councils is also proposed to be hiked to Rs 20 and Rs 10 from Rs 10 and Rs 5, respectively.

In an effort to bring new categories in the tax net, the government has proposed to introduce 'price-linked luxury tax' of 4 per cent on superior and costly textile. The terms 'costly and superior' will be defined later.

Indian-made foreign liquor or IMFL will have value-added tax or VAT in Maharashtra. The existing concessions available to ball pens, fountain pens and spectacles have been removed.

The government also proposes to reduce sales tax on specified inputs and packaging material to 4 per cent from the existing 13 per cent.

Moreover, it also proposes that the tax rate of 13 per cent applicable to compressed natural gas or CNG conversion kits be brought down to 4 per cent.

The state's budget has proposed a tax 'intellectual property'. The 4 per cent sales tax on sales of copyrights and registered designs will be levied.

Professional tax rate will be hiked by 1 per cent. This will be applicable to employees drawing salaries above Rs 3,500.

Meanwhile, the president of the All-India Association of Industries Vijay G Kalantri has welcomed the downward revision of sales tax on a wide range of products from its peak level of 13 per cent to 4 per cent in the Maharashtra budget for 2000-2001 as 'a progressive measure'.

It will definitely make industries competitive and minimise evasion and malpractices. The downward revision will particularly benefit electronic equipment, computer, CNG kits, packaging, fertiliser industries and component manufacturers and prevent flight of industries to other states.

The state government has also taken a step in the right direction by throwing open the doors of foreign direct investments to infotech, automobile and tyre companies.

Another positive indication is the interest evinced by American companies to explore investment opportunities in information technology in the state. This is evident in view of US President Bill Clinton's visit to Bombay.

With additional inputs from UNI

Business