Tax Proposal in Gujarat State Budget for the year 2014-15

 We are reproducing below the Tax Proposals in Gujarat State Budget for the year 2014-15 declared by Finance Minister Mr. Saurabh Patel on 1st July 2014.

Value Added Tax

Tax Credit on purchases of goods made from within the State and used in interstate sales

The rate of Central sales Tax was reduced to 2% w.e.f. 1/6/2008. As a result, the State suffered huge losses of tax revenue. Due compensation, as per the formula for the loss of CST revenue, was not fully paid by the Central Government which adversely affected the tax revenue of the State. In order to strengthen the tax revenue of the State, a provision was made to reduce tax credit to the extent of 2% on purchases of goods made from within the State and used in interstate sales w.e.f. 1/7/2010 under Section 11(6] of the Gujarat Value Added Tax Act,2003.

There are large numbers of manufacturing units established in the State. If the manufacturing cost of the products being manufactured by such units comes down then their capacity to compete in the interstate trade would improve which would result in growth of the trade and industry in the State. With this objective, I now propose to reduce the tax credit to the extent of 1% instead of 2% on purchases of goods made from within the State and used in interstate sales. This proposal will be implemented with effect from 1/10/2014. Benefit of this reduction shall not be available on petroleum products and natural gas.

As a result of this proposal, the tax revenue of the State will be reduced approximately to the tune of Rs. 644.00 crores annually and Rs. 322 crores during the current financial year.

L.P.G. for domestic use

In order to give relief to the consumers of L.P.G for domestic use in the State, the State Government has exempted the L.P.G. for domestic use in the State. But, due to interpretation of the relevant provisions of the Central Sales Tax in the judicial system, this tax exemption becomes available also to the Gas companies on their interstate sales of L.P.G. for domestic use. As a result, the tax revenues of the State are adversely affected. Therefore, in order to obviate such a loss, I propose to delete the entry relating to exemption of L.P.G. for domestic use in the State given vide Notification under Section 5[2] of the Gujarat Value Added Tax Act, 2003.

A separate mechanism will be put in place with the Gas companies in order that there is no increase in the prices of L.P.G. for domestic use in the State. The State will get tax revenue of about Rs. 150 crores annually from the users of the domestic L.P.G. from outside the State and about Rs. 100 crores during the current financial year while the prices of L.P.G. for domestic use in the State will not increase.

Civil works contract

According to the recent judgement of Hon. Supreme Court, certain transactions of the developer and civil contractor become taxable as works contract. There is already a provision in the Gujarat Value Added Tax Act, 2003 to levy lump sum tax at the rate of 0.6% for such works contracts. But in absence of legal clarity, some contractors have not paid the tax. Now, since there is full clarity, in order that such contractors be able to make the payment of tax retrospectively, the State Government has decided to announce a scheme for this purpose. Under the scheme, if the registered as well as the unregistered dealers engaged only in civil works contract, makes the payment of due tax retrospectively at the rate of 0.6% for the past years, a scheme for remission of the interest and penalty will be implemented. The scheme shall remain in operation for 180 days from the date of announcement. A detailed scheme in this regard will be declared hereafter. Under the scheme, tax revenue of about Rs. 100 crore is expected as a lump sum tax of the civil works contract.

Stamp Duty

Development Agreement

As per the present provisions of the Gujarat Stamp Act, 1958, the ownership rights relating to sale of immovable property are transferred in the majority of the development agreements. But, as per the provisions contained in Article-5[ga] and Article-45[g] of Schedule-1 of the Gujarat Stamp Act, 1958, the rate of stamp duty is 1% of market price, on documents relating to giving authority or power to a promoter or a developer by whatever name called, for construction on or development of, or sale or transfer of, any immovable property. But, because these documents are for transfer of immovable property, I propose to levy stamp duty at the rate of 3.5% as per Article-20. Because of this proposal, the State Government would get about Rs. 14 crores of stamp duty during the current financial year.

Due to the proposal, the State Government would receive stamp duty at due rates on such transactions and the purchaser of the immovable property would get clear ownership rights and there would be transparency in the transactions relating to sale of immovable property thus enabling proper reflection in revenue records.

Partnership  Deed

The partners can bring in immovable property or cash as capital in the Partnership Firm. If the partners bring immovable property as capital in the partnership firm, maximum of Rs. 10,000 is leviable as stamp duty, as per the present provisions of the Act. When the partners in a partnership firm bring in immovable property as their share of capital, the immovable property actually gets transferred from the name of the partner to the name of the partnership firm. Considering this aspect therefore, in the cases wherein any immovable property is being transferred in the name of partnership firm, it is proposed that such instruments of partnership firm shall be subjected to levy of stamp duty at the rate of 3.5% as per Article-20 of the Gujarat Stamp Act, 1958. Because of the proposal, the State Government would receive stamp duty of about Rs. 20 crores during the current financial year.

As a result of the above proposal, the credibility of the partnership firm will increase due to clear entry relating to ownership rights in the revenue records.

A Bill proposing necessary amendments in the Gujarat Stamp Act, 1958 will be presented in the House, during the current session.

Motor Vehicle Tax

Motor Vehicle Tax is levied as per the Gujarat Motor Vehicles Tax Act, 1958 on the vehicles used in the State or kept for use in the State. With an objective of simplification and rationalisation, I propose to make necessary changes in the rates of following vehicles.

Goods carriage vehicle

Motor Vehicle Tax at the rate of Rs. 650 per year on per 1000 kilogramme or part thereof is levied on the Goods Carriage Vehicle having gross vehicle weight exceeding 7500 kilogramme. The rate is in effect since 1997 with minor changes. I therefore propose to revise this rate to Rs. 800 per year. Because of this, there will be an increase of only Rs.1500 annually, if a vehicle is having gross vehicle weight of ten tons. The motor vehicle tax revenue will increase by about Rs. 40 crores during the current financial year due to this proposal.

Designated Omni Bus

The present rate of motor vehicle tax on designated Omni Bus known as contract carriage bus is in force since 2002. The State Government has adopted a policy of making the tax structure simple and rational. As a part of this process, for simplification, rationalisation and necessary changes in the rates of contract carriage buses as well as for removing the inequality based on the number of seats in the ordinary buses, I propose as follows:

[1]   The rates of motor vehicle tax on designated omni buses and ordinary and luxury or tourist designated omnibuses licensed to carry 6 to 12 passengers excluding driver are Rs. 1200/- and Rs. 4620/-respectively per seat per year. It is proposed to change these rates of ordinary and luxury or tourist designated omnibuses and keep the rate of tax at Rs. 1500 and Rs. 3000 respectively per seat per year.

[2] The rates of motor vehicle tax on ordinary and luxury or tourist designated omnibuses having seating capacity of 12 to 20 passengers excluding driver are Rs. 3000/- and Rs. 4620/- respectively per seat per year. To remove the inequality in the rates on mini buses because of definition of luxury vehicles, it is proposed to rationalise the rates and to keep the rate of tax of Rs. 4500 per seat per year for both these category.

[3] The rates of motor vehicle tax on ordinary and luxury or tourist designated omnibuses having seating capacity of more than 20 passengers excluding driver are Rs. 3600/- and Rs. 6000/-respectively per seat per year. It is proposed to change these rates of ordinary designated omnibus and luxury or tourist designated omnibus and to keep the rate of tax of Rs. 4500/- and Rs. 7800/- respectively per seat per year.

(4) The rate of tax on sleeper designated omnibuses licensed to carry more than 20 passengers excluding driver is Rs. 12,000 per berth per year. It is proposed to change this rate of tax and keep it at Rs. 13,200 per berth per year.

(5) I propose to introduce a new category of super luxury designated omnibus. It is proposed to keep the rate of Rs. 9000 per year per seat for super luxury designated omnibus having licensed capacity of more than 20 passengers excluding driver. And it is proposed to keep the rate of Rs. 15000 per berth per year for super luxury designated omnibus having licensed capacity of more than 20 passengers.

Implementation of the above proposals would result in an increase of about Rs. 40 crores during the current financial year.

Stage Carriage-Passenger Tax

Passenger Tax is levied at the rate of 17.5% on the sale of tickets, as per the provisions of the Gujarat Motor Vehicles Tax [Passenger Tax] Act, 1958 on the stage carriage buses run outside the municipal limits. These buses belong to Gujarat State Road Transport Corporation. With a view to provide relief to the people of the State travelling in these buses, I propose to reduce this rate from 17.5% to only 7.5% of the sale of the ticket. To implement this proposal, a Bill proposing necessary amendments in the Gujarat Motor Vehicles Tax [Passenger Tax] Act, 1958 will be presented in the House, during the current session. As a result of reduction to the extent of 10% in the tax burden on the State transport buses, the fares of state transport buses would be reduced and about twenty lakh passengers travelling daily in these buses would be benefitted.

Due to reduction in the rate of passenger tax, the State Government’s passenger tax revenue would be reduced by about Rs. 150 crores annually and about Rs. 100 crores would be reduced during the current financial year.

Entertainment Tax

With a view to providing a new source of tax revenue to the local bodies for developmental works, the powers relating to Profession Tax have been delegated to the local bodies. As a result, there has been huge increase in the funds of the local bodies. The State government is committed to strengthen the local bodies financially. As a part of this process, I propose to delegate the powers to collect and retain the Entertainment Tax on cable T.V. to the local bodies. It is expected that the local bodies would get an additional revenue of about Rs. 9.00 crores as a result of this proposal. A Bill proposing necessary amendments in the Gujarat Entertainment Tax Act, 1977 will be presented in the House, during the current session.

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Submitted by CA Kishore Soni