With GST imminent, commercial taxes intact; VAT on liquor down

Prices of commodities to remain unchanged for 4 months at least

Chief Minister Siddaramaiah has not tinkered much with commercial taxes that include VAT, entry, entertainment and luxury taxes in anticipation of the Goods and Service Tax (GST) regime which is likely to come into effect from July 1.

In his budget proposals for the financial year 2017-18, Siddaramaiah, who holds the finance portfolio, said Karnataka has been at the forefront in supporting early introduction of GST.

Levies like VAT, entry, entertainment and luxury taxes will be subsumed under GST and states will have a limited role in changing the rates.

“It is for sure that GST is going to come. There is no point in the state tinkering with the tax rates at this stage. Hence, no new taxes have been levied,” pointed out B T Manohar, the chairman of the taxation committee of the Federation of Karnataka Chambers of Commerce and Industry (FKCCI).

With Siddaramaiah not touching VAT, prices of commodities will remain unchanged at least for the next four months. Ditto taxes on cinema tickets, horse racing and hotel rooms.
However, the prices of coconut husk and millet flour will come down as Siddaramaiah has exempted these items from VAT.

The VAT exemption on paddy, rice, wheat, pulses and products of rice and ragi has been continued. The 5.5% VAT levied on liquor and beer served in bars and restaurants has been withdrawn.

Siddaramaiah has proposed to introduce a “Karasamadhana scheme” to waive 90% of penalty and interest on payment of full tax by May 31, 2017. He said the scheme will help trade and industry clear their pending tax liabilities and start with a clean slate in GST.
He said the migration of existing taxpayers to GST is under way and taxpayers in the state have shown enthusiasm in migrating to GST.

Siddaramaiah said demonetisation has hit tax collection, but the commercial taxes department will meet the revenue target of Rs 51,338 crore for the current financial year. The budget estimate for commercial taxes for 2017-18 has been fixed at Rs 55,000 crore.