Delhiites have to pay lowest taxes as AAP govt announces cuts on VAT on various items

The Aam Admi Party in Delhi once again has come up with a budget that will give Delhi'ítes a reason to smile. The government has given a clear priority to the health and education sectors in its 48,000 crore budget. At the same time public transport, water and sanitation are also projected as important features in the budget.

In keeping with its commitment to make Delhi a state with the lowest VAT regime in the country, which it announced last year, the government has proposed reduction of VAT on items ranging from air turbine fuel (ATF) for airlines operating on regional connectivity routes to sanitary napkins and construction material such as granite and plywood, blackboards and particle boards, among others.

However, the VAT slabs will be applicable only till GST is implemented. Once that happens, the VAT cuts will require a review under the GST framework and accordingly amalgamated into the new system.

The focus of the AAP government is on consolidating its core strengths as it closes the year with lower revenue and expenditure for 2016-17 than was proposed at the beginning of the year.

The budget speech did not give any prominence to AAP's ambitious projects like mohalla sabhas, aam aadmi canteens, CCTVs and WiFi which were part of previous speeches. But allocations for these sectors have been made, according to chief minister Arvind Kejriwal, who later spoke informally with reporters. For the first time in Delhi, in keeping with the decision of the Centre, plan and non plan categories have been dispensed with and the budget has been prepared under revenue and capital heads.

Also, in another first, the government has introduced the concept of "outcome budget" under which quarterly reviews will be done to assess the delivery of schemes and projects in terms of their qualitative impact and execution. Deputy CM Manish Sisodia, who holds the finance portfolio, said "it would act like a contract between the government and the people".

In a move packaged strategically to woo the migrant population in the capital, the government has proposed to bring down the VAT on air turbine fuel from 25 per cent to 1 per cent for flights plying on regional connectivity routes under the regional connectivity scheme of the Centre. Sisodia explained this as an attempt to make air travel affordable for people travelling between Delhi and remote cities and towns. He specifically referred to northeastern states to justify the need for the decision.

Speaking on the government's approach to taxes, Sisodia said: "The goods and services tax (GST) has been approved. With its implementation from July 1, 2017, we expect a positive impact on the tax revenue collection of the government. The projected tax revenue collection for 2017-18 is? 38,700 crore which is 19.33% higher than the revised estimates for 2016-17 of ? 32,430 crore."

He added that this estimate is based on the belief that there will be tax buoyancy on implementation of GST.
"Considering all these factors, no further tax proposal is being mooted during the financial year 2017-18," he said.

So, this year it is proposed to bring down VAT on sanitary napkins costing more than Rs 20, from 12.5% to 5%. The government explained this decision as a measure of concern for the health and hygiene of women. Incidentally, this proposal came on Women's Day .Sisodia also announced that VAT on laminates, plywood and blackboards, MDF boards and particle boards is proposed to be brought down from 12.5% to 5%.

As a measure that could bring down cost of materials used in the construction sector, which is witnessing a slowdown, VAT is proposed to be brought down from 12.5% to 5% on granite, swadeshi kota stone, Dholpur stone and Gwalior stone slate to bring these at par with the tax rate for marble, reduced last year.

With an eye on the municipal polls, the government has earmarked a record Rs 7,571 crore for the civic bodies, which comes to about 15% of the total allocation. Sisodia said the AAP government will continue to give subsidy to battery-operated vehicles as part of efforts to promote an eco-friendly public transport system. Also subsidies on water and power will stay.

For women's safety, the key highlight was enhancing the budget of Delhi Commission for Women by three times with a total allocation of Rs 20 crore.