Significant tax proposals by Gujarat, Kerala, Karnataka and MP States in their State Budget 2011

Gujarat

• Rate of VAT on tobacco and its products proposed to be increased from 20% to 25% (including Additional Tax). Unmanufactured tobacco would continue to remain exempt from tax

• Rate of tax on mobile phones proposed to be increased from 5% to 15% (including Additional Tax)

• Generation of all kinds of electrical energy, including captive energy except energy generated from renewable sources proposed to be subject to „Green Cess – at 2 paise per unit

Kerala

• Laterite stone, specified bio fertilizers and all types of nylon and plastic ropes have been proposed to be exempt from VAT

• Rate of VAT on soil proposed to be reduced from 12.5% to 4%

• Period prescribed for sales returns proposed to be increased from 90 days to 180 days

• Assessment of pharmaceutical companies selling medicines to Government proposed to be completed construing the sale price to Government as MRP, retrospectively from1 April, 2005 onwards

Karnataka

• Rate of VAT on goods currently taxable at 13.5% proposed to be enhanced to 14%

• Rate of VAT on declared goods proposed to be aligned with the maximum rate specified on such goods under the Central Sales Tax Act

• Exemption to paddy, rice, wheat, pulses and rice & wheat products to continue up to 31 March, 2012

• Coconut (excluding copra ) and de-oiled rice bran proposed to be exempt from VAT

• Leasing of feature films and sale of copy rights relating to feature films proposed to be exempt from VAT

• Rate of VAT on barbed wire proposed to be reduced from 13.5% to 5%

• Rate of VAT on jewellery, articles of gold and other noble metals, precious and semiprecious stones proposed to be increased from 1% to 2%

• Multilateral financial institutions such as the Asian Development Bank would be entitled to refund of tax paid on procurement of goods

• Period of validity of stay orders of the Appellate Joint Commissioner regarding disputed tax proposed to be increased from 120 days to 240 days

• Time limit for taking up assessment and re-assessment proposed to be reduced from 5 years to 4 years

• Limit of turnover for mandatory VAT audit proposed to be increased from Rs. 60 lakhs to Rs. 100 lakhs

• Provision requiring the contractors to submit copy of individual contracts proposed to be eliminated

• Quantum of penalty for clandestine transport of goods subject to tax at low rates proposed to be increased

• Rate of interest for delay in payment of tax proposed to be increased from 15% p.a. to 18% p.a.

Madhya Pradesh

• Contractors engaged in sale of buildings would be required to pay VAT at 5% on the transaction value after reducing the value of land therefrom. The contractors shall be entitled to input tax credit of goods used in the construction

• Rate of VAT on the following goods has been proposed to be reduced from 13.5% to 5%:

– cooked snacks served in restaurants

– cooked snacks and meal served by caterers other than in restaurants

– cutlery made of plastics and paper

– CFL bulbs having sale value up to Rs. 150

– foot-valve used in irrigation pumps

– Natural gas for use as fuel in manufacturing units

• Rate of entry tax on coal proposed to be increased from 2% to 3%

• Rate of entry tax on iron and steel imported for sale proposed to be increased from 2% to 5%

• Import of the following goods from outside Madhya Pradesh proposed to be exempt from entry tax:

– tea imported for blending when the blended tea is transferred / exported outside Madhya Pradesh

– crude edible oil imported for refining

– hot rolled coils imported for conversion into coated, colour coated and galvanized coils and subsequent intra-state or export sale of such converted goods