Bangles-bindi overtake biz in Gujarat budget

AHMEDABAD: An election-bound Gujarat government tried to appease the common man but distanced itself from the business community whose major demands were ignored in the state budget presented on Friday. The Narendra Modi government however, offered a 25% cut in electricity duty for residences and education institutes in a surplus budget that offered tax concessions worth Rs 410 crore, a small portion of the estimated tax revenue of Rs 51,231 crore.

Finance minister Vaju Vala did not reinstate the much-sought 2% credit on inter-state sale of goods but exempted threads used to fly kites from 5% value-added tax. The demand to lower Value Added Tax (VAT) on diesel, petrol and cooking gas was ignored, but Vala chose to remove tax on women-centric items like bangles, hair pins, combs, bindi, and kumkum. The finance minister who presented the state budget for a
record 18th time offered concessions on a wide range of low-value women-centric products, common for personal use or in the kitchen.

The state industry was hopeful of tax relief on detergent cake, auto spares, marble granite, footwear and paints. However, what topped the state’s agenda was agarbatti (incense sticks), sabudana (tapioca),
kajal, revdi, prasad and toys which are not electronic or run on batteries.

"We are disappointed. We feel that the government does not care for us. High rate of VAT has resulted in industries and business becoming incompetitive and they are moving out of Gujarat," Mahendra Patel, president of Gujarat Chamber of Commerce and Industry said in his budget reaction.

Leader of Opposition Shaktisinh Gohil termed the budget anti-people. "Gujarat levies the highest taxes in the country on petrol and diesel, but the state has not reduced taxes even in an election year. There was no debt burden during the Congress rule. Now, the debt will rise to Rs 1.60 lakh crore," Gohil added.

But chief minister Modi insisted that the budget will help the state take a giant leap on the road to development. "In last fifty years, the size of planning was Rs 2,30,000 crore. The size in the last five years has been Rs 2,50,000 crore. We want the budget to enable inclusive growth," said a state government release quoting the CM.

Despite the relief, the budget proposes to generate a surplus of Rs 317.22 crore. The annual size is estimated at Rs 1,01,712 crore, 26% higher than Rs 80,694 crore in 2011-12. Similarly, the plan outlay rose
33.15% to Rs 50,599 crore in 2012-13 from Rs 37,152.68 crore in current fiscal. The development expenditure is also expected to rise to Rs 67,162 crore in 2012-13, 28.88% higher than Rs 52,109 crore in 2011-12.

GCCI had recommended bringing down VAT on detergent cakes and powder (from 12.5% to 4%), automobile spare parts (from 12.5% to 4%), packaged mineral water (from 12.5% to 4%), paints (from 12.5% to 4%), diesel (21% plus 2% cess), petrol (23% plus 2% cess), marble, granite kota stone (from 12.5% to 4%), quartz-silica (from 12.5% to 4%), lignite (from 20% to 4%). It had also recommended exempting hand made foot ware form 4% VAT.

The 74-year-old Vala however, could win some hearts when offered a 5% tax exemption on medical implants for heart diseases. The government brought down the VAT rate from 15% to 5% on hardware used in construction of houses, electric bikes, helmets, sanitary napkins, diapers, yogurt, butter, cheese, paneer, tools, meant for tailors and barbers.

Similarly, medical implants for heart disease, roof, tiles, blood bags (for blood donations), aquatic feed for fish, toys,(handmade), incense stick (agarbatti), pooja items (lamps, bell, thali, agarbatti stand, tarbhanu), prasad–bhog, loban, googal, threads used for flying kites), dalia, chikki and revdi, sabudana (tapioca, used during fast), boria, buckle, ribbon, sari pin, broach, kajal, beads used in handicraft dress materials have been exempted from VAT.

Trade representatives believe that the tax relief and exemptions announced on Friday were long overdue, suggested five years ago while VAT was being introduced in the state. "The government continued with the tax for so long and has exempted these items after five years," said Jayendra Tanna, president of Gujarat Vepari Hitrakshak Samiti.

Other sops include exemption of loans up to Rs 2 lakh taken by women self help groups from stamp duty on instruments executed by them. The government also reduced the electricity duty by 25% on the residential
consumers and education institutes including hostels. The entire relief will reduce the government revenue by Rs 410 crore.

Later on addressing the media persons, Vala said that the fiscal health of the state is sound and the macro economic parameters are well within the standards prescribed by the Fiscal Responsibility and Budget Management ( FRBM) Act. The budget is expected to have a revenue surplus of Rs 3,615 crore, a fiscal deficit of Rs 17,830 crore or 2.63% of Gross State Domestic Product (GSDP) and a public debt or Rs
1,40,238 crore or 20.72% of GSDP. The FRBM Act prescribes that state should be revenue neutral, have fiscal deficit not above 3% of GSDP and public not more than 27% of GSDP.