Fresh taxes in Karnataka budget

Bangalore, March 5 (IANS) Fresh taxes have been proposed in the Karnataka budget for the 2010-11 financial year to raise Rs.1,829 crore for mobilising additional resources and eliminating a deficit of Rs.44.80 crore in this fiscal (2009-10).

State chief minister B.Y. Yeddyurappa, who presented the budget in the state assembly Friday, told lawmakers that luxury tax rate on hotel rooms would be increased by two percent.

‘I propose to increase the luxury tax rate to eight percent from six percent on hotel room rent ranging between Rs.1,000-2,000 and to 12 percent from 10 percent on rooms with a daily rent of above Rs.2,000,’ Yeddyurappa, who also holds the finance portfolio, said.

The budget proposed to increase the value added tax (VAT) by one percent to 13.5 percent from 12.5 percent and to five percent from four percent.

VAT on declared goods such as iron and steel, oil seeds and cotton will continue to be levied at four percent.

Taking a cue from central finance minister Pranab Mukherjee, who increased taxes on tobacco products, the chief minister increased VAT on tobacco to 15 percent from 12.5 percent at wholesale and retail level.

Yeddyurappa has proposed to collect entry tax of one percent from sugar factories instead of from distributors.

The government expects to mop Rs.1,480 crore from luxury tax, VAT and entry tax on sugar.

The chief minister, however, spared the liquor industry from any new tax burden through excise duty as the revenue target of Rs.6,565 crore for this fiscal (FY 2010) is likely to be surpassed by about 20 percent to post Rs.7,878 crore.

‘Instead of proposing any new taxation measures, I propose to consolidate measures introduced last year, including revised additional excise duty, licence fee and reduction in the margin of retailers. With a 10 percent revenue growth projection over this fiscal, the target for fiscal 2011 is Rs.7.500 crore,’ Yeddyurappa said.

Keeping in view the revival of the real estate sector and demand for land from housing and commercial segments, Yeddyurappa proposed to increase stamp duty and registration fee to mobilise Rs.100 crore in FY 2011.

‘In spite of decrease in stamp duty to six percent from 7.5 percent in this fiscal, there has been a significant decline in revenue because of fall in property transactions due to economic slowdown and recessionary trends in the real estate sector,’ he noted.

Noting that sales of motor vehicles, two-wheelers and transport vehicles had increased in the later half of this fiscal, the budget proposed to modify and increase the motor vehicle tax on various types of vehicles to mobilise an additional Rs.249 crore in FY 2011.

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