Higher VAT rate to stay in Karnataka

Bangalore, July 12 (IANS) The Karnataka government Friday proposed to retain the value added tax (VAT) rates increased last fiscal (2012-13) by 0.5 percent to make up for crop loans waived for drought-hit farmers across the state.

"I propose to continue the marginal increase in VAT rates beyond July 31 at 5.5 percent and 14.5 percent as the amount raised so far from them has not been sufficient to meet the requirement arising out of waiving crop loans farmers who suffered from severe drought last year," Chief Minister Siddaramaiah said while presenting the budget for 2013-14.

Siddaramaiah, who also holds the finance portfolio, has proposed to exempt footwear priced up to Rs.300 per pair from VAT.

Bowing to the sugar lobby's demand, the chief minister has agreed to replace one percent entry tax on sugar with one percent VAT.

"In view of the financial hardship faced by sugar factories, I propose to reduce purchase tax by Rs.20 and road cess by Rs.5 per tonne of sugarcane," the chief minister told the lawmakers.

Similarly, sales tax on diesel has been reduced by 1.10 percent to 15.65 percent from 16.75 percent, which will lower the retail price of the fuel by 51 paise per litre across the state.

The marginal reduction will cost the exchequer Rs.300 crore per annum at the present volume of diesel sold in the state.

The budget also proposes to increase the annual income limit for exemption from professional tax for pigmy agents, financial intermediaries between banks and the rural poor, to Rs.1.2 lakh from Rs.36,000 on par with other salary earners.

"The various tax relief and measures to raise additional resources are expected to generate additional revenue of Rs.1,452 crore by this fiscal end," Siddaramaiah added.

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