CA Naveen Rajpurohit

The salient features of the Karnataka State Budget for financial year 2012-13  presented in the Legislative Assembly with respect to Commercial Taxes matters  are been discussed in below article. The amendments indicated in the Article are effective from 01.04.2012 or such specific dates that it may be made effective from.

A.     Karnataka Value Added Tax Act, 2003

1.      Rate of Tax





Reduction a.      From 14% to 5% or 1%ü  Ready to cook chapathi and parota from 14% to 5%.ü  Surgical footwear from 14% to 5%.ü  Black boards from 14% to 5%.ü  Naphtha from 14% to 5%.ü  Furnace oil sold to foreign going vessels from 14% to 1%.

ü  Works contract – Manufacture of readymade garments and embroidery work from 14% to 5%.

b.      From 5% to 2%ü  Un-ginned raw cotton from 5% to 2%.

ü  Dry chillies from 5 % to 2%.

c.       From 2% to 1%ü  Jewellery and articles of gold and other noble metals, precious and semi-precious stones from 2% to 1%.


Exemptionü  Braille watchesü  Paddy, rice, wheat, pulses and products of rice and wheat will be continued for one more year from April, 2012 
Increase ü  Beedies will be subject to tax at 5%.ü  Cigarettes and other tobacco products from 15% to 17%.ü  Plastic woven fabrics will be subject to tax at 5%.

2.      General Procedure





Increase in Penaltyü  Non-maintenance of proper books accounts (Section 74)

  • From Rs. 2,000/- to Rs. 5,000/- if such failure is the first during any year;
  • From Rs. 5000/- to Rs. 10,000/- if such failure is the second or subsequent during that year.

Note: In addition to the above penalty, the dealer is also required to pay a further penalty not exceeding Rs. 200/- per day so long as the failure continues.

ü  Non-production of records or non-furnishing of information (Section 76)

  • From Rs. 5000/- to Rs. 10000/-

Note: In addition, Rs. 200/- per day so long as the failure continues

ü  Prosecution of dealers – If a dealer fails to furnish the monthly returns or quarterly return continuously for a period of 3 months or two quarters, then the dealer may be prosecuted.


Revised Returnü  It is proposed to impose restriction on filing of revised returns;ü  The audit report in Form VAT 240will be amended to delete the advice relating to filing of revised return.
Assessment / Appealsü  Rectification of Mistake (Section 69(2-A)- The provision relating to deemed rectification is proposed to be deleted.ü  Limitation for assessment / re-assessment (Section 40) – The time period for concluding assessment / re-assessment will be 5 years.ü  Stay order

  • The power of the appellate authority relating to Stay on disputed penalty and other amount will be clarified
  • Provision relating to withdrawal of automatic Stay order after a period of 240 days will be deleted.


Debit note / Credit noteü  The provision relating to debit note / credit notes is proposed to be deleted. In other words, the assessee will not be permitted to issue any debit note or credit note.
Works contractü  There will be restriction in respect of double deduction claimed on consumables used in works contract.
E-Sugam / Transit passü  E-Sugam –The Commissioner will be empowered to notify the specified goods to be uploaded in the website in respect of goods brought from outside the State.ü  Transit Pass– The Government / Commissioner will be empowered to notify the goods for issue of transit pass. Further, the provision will be amended wherein the transporter can make an application electronically and also obtain the transit pass electronically.

B.     Central Sales Tax Act, 1956

ü  There is no change in the existing rate of tax.

ü  In respect of dry chillies the rate of tax will be revised from 1 per cent to 2 per cent.

C.     Karnataka Sales Tax Act, 1957

ü  Reduction on sale of Diesel by 1.25 per cent point thereby bringing down the tax rate from 18% to 16.75%.

ü  Reduction on sales of High Flash High Speed Diesel sold to foreign going vessels from 18% to 1%.

D.     Amendments to Minor Acts





Professional Taxü  Returns – quarterly filing of returns has been withdrawnü  Time limit for filing revision petition has been increased to 180 days
Stamp Dutyü  Reduction in stamp duty

  • On conveyance/sale deeds from 6% to 5%;
  • On the market value of the property in respect of Joint Development Agreement and Power of Attorney thereof to 1% (subject to a maximum of Rs. 15 lakhs)
  • On documents relating to any Pawn and Pledge to 0.1%.
  • On Bonds to 0.5%.

ü  New levies

  • Agreements relating to advertisement for business development, granting of exclusive rights of telecasting/broadcasting of programs and assignment of Intellectual Property Rights – stamp duty at 0.1%
  • On Excise bond – Stamp duty of Rs. 100/-.
  • It is proposed to include “currencies” under the “Brokers’ Note” along with Goods or Commodities.
  • Agreements relating to Works Contract the stamp duty at 0.01% subject to a maximum of rupees five lakhs.

ü  Increase

  • In respect of partnership deeds, the minimum slab of capital and the stamp duty payable thereon is proposed to be increased.
Luxury Taxü  Tax at 10%

  • On luxuries provided in temporary structures operating as marriage halls.
  • On luxuries provided in seminar halls, conventional halls and others.

ü  Self-assessment is envisaged under luxury tax law.


Entertainment Taxü  Automatic registration of proprietors of cinema theatres;ü  Self-assessment has been envisaged

Disclaimer – The views expressed and the information provided in above are of general nature and is not intended to address the circumstances of any particular individual or entity. It does not express any views or expert opinions.  It is recommended that professional advice be sought based on the specific facts and circumstances. Author neither accepts nor assumes any responsibility or liability to any reader of this article in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take. This article does not substitute the need to refer to the original pronouncements.

Prepared & Compiled By – CA Naveen Rajpurohit, Naveen Rajpurohit & Co.,Chartered Accountants,No. 41 , 5th Main Road ,3rd Cross, Opp to Axis Bank,  Chamrajpet, Bangalore – 560 009,e-mail: naveen@naveenrajpurohit.com

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