Fiscal Initiatives

   

IndustriesFood inflation has, considerably, eased in the recent months. I am tempted to bring these items under the tax net from the next financial year. However, I feel that it will be prudent to wait till the economy stabilizes sufficiently. Accordingly, I announce continuation of these exemptions up to 31st March, 2013. I will have to forego revenue of over a couple of hundred crore of rupees on this account.

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VAT on Industrial units

I had mentioned last year that the industrial units, registered in the state, have been enjoying tax concessions under the relevant packages of incentives, announced by the government from time to time. With the switch over to the VAT regime, these concessions were supposed to have come to an end but were continued in a modified manner.

Serious discussions have been taking place at the national level through the Empowered Committee of State Finance Ministers and other national level workshops to switch over to a uniform national level Goods and Services Tax (GST) regime in the interest of bringing in further transparency, simplicity and efficiency in tax administration and removal of the cascading effect of the tax burden on the consumers. The proposed date of implementation of GST has been deferred from time to time because of a lack of unanimity among the States.

Tax concessions to the industry cost nearly Rs 500 crore annually. I had announced extension of the benefit of this tax concession to the industry for a further period of one year or till adoption of the proposed GST regime by our state, whichever happens to be earlier. The period of concession expires on 31-3-2012. On the aforementioned considerations, which are still valid, I announce continuation of the existing tax concession to the industrial units for a further period of one year up to 31st March, 2013, or till adoption of the new GST regime by our State, whichever happens earlier.

Tax on Hotels
The Tourism Sector is highly beneficial to our people and to the State’s economy, but it contributes very little to the revenues of the State, despite the fact that it puts heavy pressure on the resources of the State and its infrastructure.

In view of the fluctuating arrival of tourists in the State, I had announced several concessions and exemptions favouring the Tourism sector. These concessions have been extended by me on yearly basis, first up to 31st March, 2011, and then up to 31st March, 2012.

The current financial year has been a boon for the Tourism sector of the State. I would be amply justified in asking this sector to start making some revenue collections from the visitors by way of taxes and fees under the existing laws for contributing to the exchequer of the State. However, as a gesture of high goodwill of the government in favour of this sector, I announce no change in the status-quo for a further period of one year, commencing from the first April, 2012.

VAT on fertilizers
A smiling farmer is the most prominent symbol of economic strength. The present government is determined to broaden his smile by continuing to support the agriculture sector through all possible means.

Chemical fertilizers, bio-fertilizers and micronutrients are extensively used for improving farm productivity. As a sequel to the earlier tax concessions, announced by me for my brothers engaged in agriculture, I propose to fully exempt all types of chemical fertilizers, bio-fertilizers and micro-nutrients from the levy of VAT.

VAT on fungicides

I have already exempted pesticides, weedicides and insecticides from the levy of VAT. The use of fungicides is equally important for the protection of crops and improvement in productivity. Presently, fungicides attract VAT at 13.5%. I, now, propose to exempt all types of fungicides from the levy of VAT.

A Package For Tourism
Next to Agriculture, the Tourism sector has always proved to be an important vehicle of economic growth and employment generation in our State. This sector has gone through tough times during the last over two decades. We are expecting a turnaround in this sector now because of the very encouraging experience of the last summer. The Government has, accordingly, revisited the existing package of incentives for ‘Tourism Units’, which term includes hotels, motels, houseboats, paying guest houses, cafeterias, swimming pools, conference centres, amusement parks, recreation centres, cable cars, adventure activities and tourist coaches etc. I am happy to announce the following new package of incentives to benefit the ‘Tourism Units’:

(i) The list of areas and locations, where the ‘Tourism Units’ shall be eligible to get incentives as per the new package, is being considerably liberalized and expanded.

(ii) A Capital Outright Investment Subsidy of 30% shall be given by the government on fixed assets, created by new investments, subject to a limit of rupees 30 lakh.

(iii) The limit on the amount of Capital Subsidy shall be increased to rupees 100 lakh in the case of Prestigious Units, which invest rupees 25 crore or more.

(iv) The Capital Subsidy shall also be available on substantial expansion by the existing Units, which make at least one third addition to their existing bed capacity.

(v) The cost of preparation of Detailed Project Reports shall be reimbursed by the Government in full.

(vi) Remission of Stamp Duty on mortgages to be allowed to the extent of rupees fifty thousand.

(vii) The cost of Insurance Cover shall be subsidized up to 60%.

(viii) The cost of DG Sets shall be subsidized up to 75%.

(ix) Capital Subsidy in case of Paying Guest Houses shall be 40%.

(x) Subsidy up to 50% shall be admissible on equipment for adventure tourism, kitchen & related appliances, tourist coaches, air conditioning, office automation, etc.

(xi) The cost of training of managerial personnel shall be reimbursed to the extent of 50%.
Details of the expanded list of locations, where these incentives shall be available, the conditions of eligibility and the procedure for sanction of these incentives, along with other details, shall be notified by the Government separately.

Insurance
A Central Government supported scheme of crop insurance is under operation in the state also. However, the National Agriculture Insurance Company has not provided the desired level of coverage to the farmers so far. Similarly, another scheme of cattle insurance is in operation through private sector insurance companies. These private sector insurance companies are reluctant in coming forward to extend insurance cover to cattle, sheep, goats and poultry units as they apprehend high risks and low profits in this type of insurance activity. All insurance services attract levy of service tax under the provisions of the J&K General Sales Tax Act. As such, in order to attain the dual objectives of making this vital insurance programme popular among the farmers and more attractive for the insurance companies, I propose to exempt the insurance services, which cover agricultural and horticultural crops and all types of cattle wealth, including infrastructure of dairy, poultry, sheep, goats, bird units and fish farms, from the tax, chargeable under the J&K GST Act.

The Gender Budgeting

Housewives have been weary of rising prices and keep on complaining that their home budget is going out of hand. With a view to improving their home budget, I am inclined to transfer a part of their burden to my budget.

Accordingly, I announce complete removal of Value Added Tax on domestic cooking gas. I do hope that with this measure, not only will the budgetary deficit of their homes get somewhat mitigated, the pressure on our Power Development Department for more and more energy supply shall also get reduced.

At this juncture, I have two more announcements to make in pursuance of my gender budgeting approach in budget formulation.

Under the ‘Beti Anmol Scheme’, the Government has decided to incentivize admissions to the 11th Class, taken by girl students, belonging to BPL families and living in Educationally Backward Blocks. I further propose to fully exempt such girl students from making any contributions to the authorized Local Funds of the concerned Government Higher Secondary Schools. This measure shall provide to them, an additional financial relief, varying between Rs 600 to Rs 900.

Every year, thousands of girls, belonging to BPL families, compete for Government jobs through the J&K Public Service Commission, the J&K Services Selection Board and the J&K Police Recruitment Board. They are required to pay the prescribed Application Fee and a fee for appearing at the competitive examinations. I propose to exempt them from making such payments. The losses, caused to the Revolving Funds of the examining bodies, shall be compensated by the Government, wherever necessary.

For Youth and IT
Information Technology, particularly the use of IT gadgets like desktops, laptops, palmtops etc has become very popular among our youth.

Unfortunately, the high price tag of these items has kept them out of the reach of the less affluent sections of our society. Nevertheless, the use of computer peripherals like pen-drives, CDs, memory cards, chips, headphones, computer cleaning kits, electronic diaries and other IT peripherals has become very common, even among the youth who do not own computers themselves. With a view to further boosting the use of Information Technology among the youth, I propose to wholly exempt computers and all the aforementioned IT related items from the levy of VAT.

Some stationery items are being taxed at the rate of 13.5%. Another group of stationery items comes under the 5% category. Items like adhesives, gums, glues, adhesive solutions, gum pastes, lapping compounds, epoxies, resins, tapes, tags, markers, sealing wax, paper envelopes, pencils, crayons, highlighters, erasers, sharpeners, pencil boxes, ‘takhti’ etc are extensively used by our school going children. These young groups constitute our future. I feel that we owe it to them to contribute to the building of their future. As a token of my contribution, I propose to fully exempt all the aforementioned stationery items from the levy of VAT.

Mini hydel projects
The J&K State Hydroelectric Projects Development Policy, 2011, seeks to accelerate the construction of Mini Hydel Projects by the private sector under the IPP Mode. This sunrise, clean and green industry needs some initial support from the government for improving the financial viability of Mini Hydel Projects and keeping their cost of generation low. I, accordingly, propose to exempt all power generation and transmission equipment, building material and construction equipment for the hydel projects, awarded under this policy, from the levy of tax under the J&K Entry Tax Act. As a further incentive to such hydel projects in the private sector, the new policy also provides for exemption from the levy under the J&K Water Resources (Regulation and Management) Act, 2010, for a period of 10 years.

Service Tax on IT Institutes

All coaching centres, teaching institutes and educational institutions in the private sector are subjected to the levy of tax under the J&K GST Act. IT education is also covered by this tax.

The Government has been encouraging the establishment of IT centres and institutes in the private sector with a view to promoting computer literacy, IT awareness and IT applications within the State. In support of this objective, I propose to exempt all IT Institutes, IT coaching centres and IT educational institutions from the levy of tax under the J&K GST Act.

Service Tax on Medical Treatment

Medical services in the private sector had been brought under the ambit of tax, chargeable under the J&K GST Act. Private hospitals, nursing homes, diagnostic centres, pathological laboratories etc have to pay service tax at the rate of 10.5%. It has been pleaded before me that medical services are provided to the sick in conditions of distress. It is widely believed that tax on medical services is the only tax which is to be paid by people, going through conditions of misery, regardless of their financial status.

I have thought over the issue and feel inclined to agree with this view. I, therefore, propose to remove all types of medical, diagnostic and curative services for humans, as well as the veterinary sector, from the levy of tax under the J&K GST Act. I trust that the benefit of this exemption shall be passed on to the patients. I shall be constrained to withdraw this concession if this does not come about.

VAT on electric blankets
The use of electric blankets in homes, hospitals and tourism establishments is gaining popularity. Presently, it attracts VAT at 13.5%. I propose to exempt this item from the levy of VAT in the interest of popularizing its use and helping in the promotion of local industry.

Levy of tax on job works
Execution of ‘job works’ by a registered industrial unit, on behalf of another registered industrial unit, attracts the levy of tax under the J&K GST Act. Several industrial organizations have contended that this levy of tax would take away all the benefits of industrial clusters, which are to be established as part of the current industrial policy followed by the Ministry of MSME, as this policy involves undertaking of lot of ‘job works’, by way of specialized services, to be rendered by the industrial units.

With a view to resolving this issue, I announce 100% exemption from the levy of tax under the J&K GST Act in favour of registered industrial units in respect of ‘job works’, done by them on behalf of any other industrial unit.

Entry Tax on items for scientific research
Scientific research is essential for any economy to grow. The institutes, engaged in the conduct of such research in our State, are dependent on costly scientific equipment, critical chemicals and reagents, which are to be procured from outside the State. Presently, such goods are liable to Entry Tax. In order to facilitate and encourage scientific research, I propose to exempt scientific equipment, critical chemicals and reagents, used by the Research and Development Institutes of the Central and the State Governments, functioning within the State, from the levy of Entry Tax.

Stamp Duty rates on certain transactions/deeds
I have apprised the Hon’ble Members of this August House about the tremendous improvement in tax collections from Stamp Duty and registration fees. It has come to my notice that the raising of loans from commercial banks and the registration of hypothecation deeds against such loans has become costly. I have examined the issue and propose the following modifications in the existing rate structure:

(i) Stamp Duty on deeds of hypothecation shall be reduced from its current level of 0.5% to 0.25% and shall be subject to a minimum of Rs 1,000 and a maximum limit of Rs 50,000 in place of the present limit of Rs 5 lakh.

(ii) The Stamp Duty on equitable mortgage shall continue to be 0.25%, but will be subject to a minimum limit of Rs 1,000 and a maximum limit of Rs 50,000 in place of the existing upper limit of Rs 5 lakh.

Strengthening the collection mechanism of GST
The amount collected through the government departments, making deduction of tax at source under the provisions of the J&K GST Act, forms a sizeable chunk of revenue. In order to strengthen this mechanism, I propose to make timely and proper deduction of this tax and its timely deposit into the government treasuries mandatory.

Once this is done, the large number of contractors, who have, practically, no direct responsibility of depositing this tax into the treasury, can be saved from unnecessary procedural hassles. I further propose to take the following measures to simplify the procedure in this behalf:-

(i) The tax clearance certificate, which is required to be obtained afresh by the contractors for each NIT, shall remain valid for the whole financial year.

(ii) Security, which is equivalent to 10% of the expected annual turnover, shall be waived off.

(iii) The registration renewal fee shall also be waived off.

Special Amnesty Scheme from SFC for less privileged classes:

The J&K State Financial Corporation had extended soft loans to beneficiaries from the Scheduled Castes, Scheduled Tribes and Physically Challenged groups. As of now, over 100 cases, belonging to SC and ST and a couple of cases, belonging to Physically Challenged groups, are pending settlement, despite the lapse of nearly two decades. I propose to settle all these long pending disputed cases through a Special Amnesty Scheme, which will be worked out by the J&K SFC, keeping in view the indigent circumstances of these beneficiaries.

Having announced all these relief measures and financial incentives, I deserve to be compensated for the loss of revenue involved in these measures. For this purpose, I propose to touch only a few areas.

Anti- tobacco measures

As a part of the health protection measures, I had announced a couple of tax measures to curb the menace of smoking and other forms of tobacco consumption. I had announced an increase in Toll on the import of raw tobacco from Rs 150 per quintal to Rs 250 per quintal. I had also announced increase in VAT from 13.5% to 25% on the sales of cigarettes and other related products.

The monitoring of imports and sales of raw tobacco and cigarettes during the current financial year, up to the third quarter, has revealed that the actual imports have not increased so far, even though they do not show any declining trend over the previous year’s import figures. I propose to continue with my anti tobacco campaign, which I had started last year, and announce a further increase in the rate of VAT from 25% to 30%.

Last year, I had announced a contribution of rupees one crore to the corpus of the Cancer Treatment and Management Fund. Government employees have also contributed in large numbers to the Fund, which I highly commend. The Fund has done an appreciable job by extending financial help of over rupees one crore and twenty two lakh to 444 needy and poor patients. I announce a further contribution of rupees two crore to this Fund during the next fiscal. Simultaneously, I repeat my appeal to all the Government employees to donate generously to this Fund as they did the last time.

GST on sale of liquor

Smoking and drinking are harmful and equally undesirable. If I increase tax on cigarettes and leave out drinking, it may be considered discriminatory. Sales of IMFL, beer etc carry a sales tax tag of 25%. I propose to enhance this rate to 30% under the J&K GST Act.

Tax on Services under GST Act:

I have been reviewing the list of Services, covered by the J&K GST Act, from time to time. Last year, I had added six more services to the list. I now propose to add the following three more services to the list to be brought under the tax net:-

(i) Security and Placement Services,

(ii) Pandal and Shamiana Services,

(iii) Annual Maintenance Contracts.

Revision of Toll rate
As the Honorable Members of this August House are aware, Toll is not an ad valorem tax. As the cost of collection of toll keeps on rising, it is prudent to keep on adjusting the rate of Toll. In consideration of this factor, I propose a modest increase of five paisa per kilogram in the existing rate of Toll.

Taxation law is continuously evolving. Its administration, sometimes, leads to conflicting interpretations and requires a conciliatory effort on the part of the tax administrators and the registered dealers to resolve such issues, as they arise.

Complicated procedural issues may, sometimes, necessitate changes in the prescribed procedure. With a view to creating an institutional mechanism for this purpose, I propose to constitute a Grievance Redressal Committee, comprising all the concerned senior Government functionaries and representative of trade bodies, to undertake such redress exercises periodically.

Financial relief in identified sectors

The Government has been continuing with its employee friendly policy, as has been amply exhibited so far. We shall continue to do so in future as well.
The present rate of remuneration, payable to the teachers, engaged under the ‘Rehbar-e-Talim scheme’, is Rs 1,500 per month. After the expiry of two years, they are paid rupees 2,000 per month. These teachers are rendering valuable services to the society in the field of education. In recognition of their valuable services, I propose to enhance their remuneration to a uniform level of rupees 3,000 per month from the next financial year.

‘Nambardars’ and ‘Chowkidars’ are being paid a monthly remuneration of Rs 501 per month and Rs 500 per month, respectively. These rates have been in operation since 1.4.2007. In recognition of the services, which they have been rendering to the society, I propose to increase their remuneration to Rs 751 and Rs 750 per month, respectively, from the next financial year.

Conclusion
Consolidation of peace always opens up ways to progress and prosperity for the people. The current year has amply proved this. Now is the time for the people of the state to reap the dividends of peace, as has been stated by our honourable Chief Minister, Janab Omar Abdullah Saheb. It is our duty to nurture the present climate of peace and momentum towards growth. Let us join together in this effort, regardless of our political ideology and irrespective of our assigned roles in this August House.

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