Budget 2004-05

(Govt. of NCT of Delhi)

Budget Speech - Part B (Tax Proposals)

 TAXATION

                Mr. Speaker, Sir, since the last five years our Government has been following a pro-people taxation policy aimed at overall socio-economic development of Delhi. This policy is essentially based on the all round promotion of prosperity and well being of the common citizen of Delhi, mobilization of needed resources for infrastructure development and welfare programmes, simplification and rationalization of taxation system thereby making it people friendly and trade supportive to preserve and add to the distributive character of business and trade in Delhi. Our Government proposes to continue and further reinforce this policy in the year 2004-05 to serve the interests of the citizens of Delhi. 

Sales Tax and related matters

 2.                 First of all, I take up sales tax and related matters. Sir, the revenues of my Government have grown satisfactorily in 2003-04, the growth of sales tax revenue was about 14.19% compared to about 4.62% in 2002-03. Rs. 4,435.67 crores were collected as sales tax revenue as against the revised target of Rs. 4200 crores by concentrating departmental effort on achieving better tax compliance.

3.                 The pendancy of assessment years has been reduced from 2 years to 1 year, thereby making the assessment process current. The Sales Tax Appellate Tribunal which is now fully functional is providing much needed relief to the trading community by speedy disposal of appeal cases. 

 Summary Assessment     

 4.                 My Government feels that revenue realization can be increased by reposing trust in the honest tax payers and channelizing time, energy and effort of the departmental officers on areas of non-tax compliance. The summary assessment scheme is a very important step in this direction. I, therefore, propose to broaden the scope of the scheme and make it more inclusive by making this scheme, with the ceiling of Rs Two crores, available to all the registered dealers from this year onwards without any conditions. I appeal to the traders to take full advantage of the scheme by continuing their support to it for hassle free assessment. 

Value Added Tax

 5.                 The effort of my Government would be to see that the VAT system is simple, trust based and tax payer friendly, and at the same time, protects our revenues and trade interests.

Rationalization

 6.                 Mr. Speaker, Sir, for better tax administration, tax laws should be simple and with minimum number of classifications. With this objective in view, I propose to initiate the following steps in the current financial year:

 a.      Remove footnote to ST-35 – Footnote on ST-35 allows dealers to sell 1^st point items again against ST-35 making a long chain of dealers as in the case of last point taxable items. Thus the liability to pay tax is continually shifted leading to evasion of tax and this defeats the basic purpose of bringing the items to 1^st point. 

b. Demat statutory forms – To prevent loss or theft of forms and repeated visits of the dealers for issue of new forms.

 c.      Demat challans.

 d.     Withdrawal of Concessional rate of tax on inter-state sale of Schedule-IV items – Concessional rate of tax was allowed to all Schedules except Schedule-I prior to the incorporation of Schedule-IV. This facility should not have automatically extended to Schedule-IV items since Schedule-IV items are taxable at the rate of 12 to 20% like Schedule-I items (which are taxable at the rate of 12%). No concession can be allowed to items in both the Schedules. 

Tax Payer Convenience  

7.                 Sir, tax payer convenience is an important aspect of any taxation policy. To make the refund process simpler and more transparent we have introduced refund through electronic clearance system of banks.  Along with this, we propose to take up the following activities in the second phase of computerization project for the convenience of tax payers :

 a.      Providing tax payment information to the dealers through internet/e-mail.

 b.     Official communication between department and dealers through e-mail. 

c.      Providing cause list and status of sales tax cases on Internet.

             d. Special Cell to be created for the bigger tax payers.

Point of Taxation 

8.                 Sir, in order to reduce the revenue loss and administrative cost of collection, I propose to make the following changes in the points of taxation:

 (a)  Cooked food sold in hotels and restaurants from first to last point:

 To check evasion of Sales Tax due to charging of lower price by sister concerns.

 (b)    Country Liquor from first point to last point:

To check evasion of Sales Tax due to charging of low price by sister concerns, it is proposed to shift country liquor from first point to last point so that the excise duty becomes a part of cost price of country liquor when the same is sold by wholesaler to the retailer.  Thus, Sales Tax would be levied on the price of country liquor inclusive of excise duty.

 (c)   Coffee from last point to first point:

 It is proposed to change the point of taxation in respect of Coffee from last point to first point on similar lines as Tea with immediate effect to prevent revenue leakage.

  (d)    Paper and paperboard  from last point to first point:

 Paper and paperboard are sold by a large number of small dealers of stationery items who do not come forward for registration under the DST Act and therefore, are not assessed.  Moreover, Sale of paper and paperboard is also made against Form of ST-1 making a long chain of transactions.  Since trading of paper and paperboard takes place in the organized sector, this item should be brought to first point of taxation for better monitoring of manufacturers, importers and wholesalers.

 (e)       Bullion, articles and ornaments made of Gold and Silver from last    point to first point: 

 Since there is practically no addition of cost value in these items whether sold by wholesalers to the retailers or by the retailers to the customers, it is proposed to bring these high priced items from last point to first point of taxation.  

 (f)     Timber from last point to first point:

 At present, Timber is a last point item taxable @ 8% and, therefore, may be sold against Form ST-1 from one

registered dealer to another, thus forming a long chain of dealers.  Since  there   are  less  number  of   major manufacturers in Delhi, it is proposed to shift Timber from last point to first point for better monitoring of manufacturers, importers and wholesalers.

 Tax Proposals

 9.                 Mr. Speaker, Sir, my Government is committed to the policy of progressive taxation which is aimed at equitable distribution of wealth in the society. At the same time being the National Capital Territory, my Government is expected to provide funds for the provision of world class civic amenities. The revenue requirement for civic utilities is further enlarged due to the constant flow of migrants from other states. We can broaden our tax base and increase revenues by merely correcting UFR infringements in the following manner:

 Entertainment Tax

 10.             The rate of entertainment tax on cinema tickets was reduced from 60% to 30% last year with a view to promote the entertainment and tourism sectors in Delhi and also increase revenue by increasing the number of footfalls in the cinema halls. It is proposed to continue with this rate on cinema tickets in the  current year to encourage these centres/hubs of family outings and entertainment.

 Entertainment Policy

 Mr. Speaker, Sir, my Government intends to evolve a cultural and entertainment policy for Delhi aimed at encouraging the hosting of entertainment and cultural programmes in Delhi and at the same time protect the revenue interests of the Government. The Government would look at incentives which could be included in the said policy for setting up of integrated entertainment hubs, especially those related to adventure/sport activities to provide a re-creational and healthy environment  for the citizens and inculcate in them a spirit of competitiveness and goodwill, keeping in view the hosting of the Commonwealth Games by our City in 2010. 

 Luxury Tax

 11.             For the year 2003-04, the actual revenue collection was Rs. 89.4 crore against the target of Rs. 88 crores. It is proposed to revert to the declared tariff regime in the area of luxury tax in order to make the billing system transparent for tourists and to plug the loss of revenue by way of evasion and discretionary reporting.

 Ad Valorem Tax on Motor Vehicles

 12.             Sir, in the Budget Speech for the year 2003-04 it was proposed to introduce ad-valorem basis of road tax calculation for private non-commercial vehicles, in order to differentiate costlier vehicles from cheaper ones. To start with, a tax rate based on value of vehicles in two slabs was proposed:  2% on vehicles costing up to Rs. 4 lakh and 4% on those costing more than Rs. 4 lakh.  This proposal could not be implemented during 2003-04 due to some legal issues.  Hence, it is proposed to implement this during the current year. 

 I would like to announce here the intention of our Government to prescribe an additional levy of 2% on private non-transport diesel vehicles over and above the Ad-valorem Tax Rate, based on the value of vehicles, given above.  This step is aimed at encouraging the individual and private owners to shift to cleaner fuels for personal transportation requirements.  We have already got the in-principle clearance of the Ministry of Road Transport and Highways and the Ministry of Home Affairs to the proposed amendments in the Delhi Motor Vehicles Taxation Act, 1962 and we propose to include the additional levy of 2% in the proposed Amendment Bill.   

We would also examine the possibility of imposing an additional entry tax on diesel vehicles registered outside Delhi to discourage the entry of such vehicles in Delhi. Further such measures to curb pollution from diesel vehicles and provide targeted external support to capital intensive projects which have social and environmental benefits would be explored. 

Stamp Duty

13.             Mr. Speaker, Sir, my Government had brought down the stamp duty on legal instruments relating to sale of property from 8 to 5% in general cases and to 3% in case of female registrants to encourage and promote healthy transactions in the real estate market. On our request, the Municipal Corporation of Delhi and New Delhi Municipal Corporation had reduced the transfer duty to 3% so that the overall total charge on property transaction was reduced to 8% in general category cases and to 6% for female registrants.

The reduction in the stamp duty and the resultant higher volume of sale of non-judicial stamp papers used for registration of immovable properties yielded an encouraging Rs. 381.34 crores in the year 2003-04 as compared to Rs. 362.70 crores in the year 2002-03. This reduction in the stamp duty was effected by means of a Government notification and we propose to continue with the stamp duty rates as given above. The process of bringing in a legislation to recommend a statutory amendment in the Indian Stamp Act, 1899, which is a central legislation, has been initiated.

15.     I also propose to generate additional revenue by initiating steps for discontinuation of General Power of Attorney and to make compulsory  the  registration of  agreement  to sell on  payment of prescribed stamp duty. We also propose to explore the possibility of fixing circle rates of land in Delhi to achieve uniform valuation and higher revenues.

 Tax Relief’s 

16.     A promise has been made in the National Common Minimum Programme (NCMP) that  “tax rates will be stable and conducive to growth, compliance and investment“.  Through the above said measures, I have signalled our government’s commitment to moderation and stability in taxes and to increase our internal revenues.   Nevertheless, keeping in view the interests of the citizens, especially the disadvantaged and poor sections of the Society, my government proposes to make the following concessions:

a)             Exemption from Sales Tax and re-imbursement of Works Contract Act Tax to DMRC for phase-I of the Delhi Metro Rail Project.  These exemptions have been given to reduce the Project Cost so as to enable DMRC to lower the travelling cost for the public.  As and when all the phases are completed and the ridership reaches the projected levels, it is hoped that Metro would be able to bear its operational costs.

b)            Medicines which are most commonly used for extended periods in chronic diseases and life saving drugs which are used in acute life threatening situations are proposed to be exempted from Sales Tax as per the given list:

I)                  Prevention of Hepatitis B – Hepatitis B vaccine

II)               Tuberculosis (Multi Drug Resistant) – Ethionamide, Kanamycin and Cycloserine.

III)            Diabetes – All preparations of Insulin.

IV)             Myocardial Infarction / Prevention of deep vein thrombosis in surgical/bed ridden cases – All low molecular weight Heparine, Streptokinase and Amiodarone.

V)                Anti Cancer Drugs – 5 FU, Tamoxifen, Hydroxy Urea, Vincristine Sulphate, Cisplatin, Mitomycin and Injectible Ondansetron.

VI)             Dog Bite – Anti Rabies Vaccine (Cell Culture)

VII)          Kidney Transplant/Chronic Renal Failure – Cyclosporin and CAPD Fluid.

VIII)       COPD/Asthma – Salbutamol Inhaler and Budesonide Inhaler.

IX)              Anti HIV Drugs – Zidovudine, Stavudine, Lamuvidine and Nevirapine.

X)                 Shock - Dobutamine 

c)             It is further proposed to exempt Glucometer, strips and insulin syringes from Sales Tax to provide relief to chronic diabetics. 

d)             All the transactions made by the National Thallassemic Welfare Society  in respect of drugs(Deferiprone), equipments and novelties will be exempt from Sales Tax.

e)             Cochlear implants will be exempted from Sales Tax on similar lines as hearing aids.

f)              Sales Tax on Alumunium utensils will be reduced from the present 8% to 4%.

g)            Sales Tax on Mobile Phone Accessories will be reduced from the present 8% to 4%.

h)            It is proposed to remove the presently charged Sales Tax on sale of used/pre-owned cars.

i)               It is proposed to exempt cotton - pillow covers from Sales Tax to help the handloom weavers engaged in this sector.

j)              It is proposed to exempt Ball Pen Ink from the levy of Sales Tax to help the small manufacturers become competitive.

k)             It is proposed to raise the ceiling from the present Rs.200/- to Rs.300/- on the categories of foot wear exempted from the levy of Sales Tax subject to the condition that the M.R.P. is indelibly marked or embossed on the foot wear itself.  

 Conclusion

 17.                Mr. Speaker, Sir, this August House is aware of the usual problems of urbanization like congestion, pollution and over stretched civic amenities facing the average citizen of Delhi. It is in order to mitigate these difficulties that more than 88% of the plan outlay has been earmarked for areas like energy (19%), transport (23%), health (11%), education (10%), urban development (11%) and water supply & sanitation (14%). Our Government is fully committed to tackling the problems in these areas and to pay special attention to the provisions of basic civic amenities to improve the quality of life in the capital city of the country. Our dream is to have a city where every child can go to school, enjoy pollution free surroundings, good health and convenient means of communication. My endeavour has been to provide for all round development of the city, be it on the infrastructure front or to strengthen the social security of weaker sections of the society. Sir, the last five years have been a period of expansion and we expect to consolidate the gains of this expansion in the next five years to make Delhi a world-class city. In my tax proposals, efforts have been made to ensure increased resource availability for this purpose. My Government seeks the total support and cooperation of this August House in implementing these measures and I personally look forward to the guidance of this House in achieving the objectives set out in my budget proposals.

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