Despite having one of the lowest tax to
GSDP (gross state domestic product) ratio in the country, the Punjab
Government continues to soft-pedal on the issue of imposing fresh taxes.
Under pressure from its alliance partner, the BJP, the SAD has refused
to either raise the rate of value added tax (VAT) on diesel or impose
professional tax.
The government was proposing additional resource mobilisation (ARM) to bridge the huge revenue deficit staring at it in the face. For this, the government had proposed to increase the VAT on diesel from 8.8 per cent to 13 per cent, and thus increase the contribution of VAT on petroleum products in total revenue from VAT.
Currently, the percentage is just 22.7 per cent in Punjab while it is 28 per cent in Haryana and 34.9 per cent in Rajasthan. Interestingly, though the value-wise sales of petroleum products are going up, the volume of sales of diesel are coming down in Punjab.
Figures collected from the Excise and Taxation Department reveal that the volume of sale (for diesel) has come down by 6.27 per cent in the first quarter as compared to the corresponding period last year. However, because of hike in prices of diesel, the value of sales has gone up by 5.95 per cent (up by Rs 3,435.04 crore). As a result, the tax deposited, too, has increased by 12.02 per cent (Rs 323.27 crore) during this period.
It has been learnt the issue of increasing VAT and the proposal to impose professional tax (thus collect Rs 500 crore per annum) was initially proposed to be taken up during the Cabinet meeting on July 23. However, following disagreement with the BJP, the SAD decided to defer the imposition of professional tax while a committee has been formed to look into the rationalisation of VAT on petroleum products.
It seems maintaining political equations with its alliance partner has gained precedence over the more delicate issue of raising resources for the cash-strapped government.
Growth in revenue during the first quarter has been much below than targeted this year. The collections in stamp duty and land registration have shown a marginal increase of 8 per cent as against the target of 15 per cent. Even the VAT collections in the first quarter have shown an increase of around 11.8 per cent, as against the target of 25 per cent. However, the only recourse the government has taken is to plug the loopholes in tax collection by making e-filing of trade transactions (for six commodities) above Rs 50,000 (e-trip), and increase the retirement age to 60, and thus defer payment of retirement dues (amounting to Rs 1,000 crore). Another Rs 1,000 crore will be earned through regularisation of illegal colonies.
These measures may, however, not be enough to bring down the state government’s revenue deficit from Rs 4,758 crore in 2012-13 to Rs 1,747 crore this year. For this, the state government needs to mobilise Rs 3,011 crore, which may not be possible considering the slowdown in growth and its unwillingness to impose fresh taxes.
The recent ‘Comptroller and Auditor General report on State Finances for Punjab’ has also recommended that budgetary control should be strengthened in all government departments, particularly in those where savings, excesses have been observed for the last four years. It is also suggested that anticipated savings should be surrendered as and when these are expected so that the amount could be utilised on other schemes. Budget estimates should be prepared with due care so that there were no huge savings, surrenders or excesses over the budget estimates.
The government was proposing additional resource mobilisation (ARM) to bridge the huge revenue deficit staring at it in the face. For this, the government had proposed to increase the VAT on diesel from 8.8 per cent to 13 per cent, and thus increase the contribution of VAT on petroleum products in total revenue from VAT.
Currently, the percentage is just 22.7 per cent in Punjab while it is 28 per cent in Haryana and 34.9 per cent in Rajasthan. Interestingly, though the value-wise sales of petroleum products are going up, the volume of sales of diesel are coming down in Punjab.
Figures collected from the Excise and Taxation Department reveal that the volume of sale (for diesel) has come down by 6.27 per cent in the first quarter as compared to the corresponding period last year. However, because of hike in prices of diesel, the value of sales has gone up by 5.95 per cent (up by Rs 3,435.04 crore). As a result, the tax deposited, too, has increased by 12.02 per cent (Rs 323.27 crore) during this period.
It has been learnt the issue of increasing VAT and the proposal to impose professional tax (thus collect Rs 500 crore per annum) was initially proposed to be taken up during the Cabinet meeting on July 23. However, following disagreement with the BJP, the SAD decided to defer the imposition of professional tax while a committee has been formed to look into the rationalisation of VAT on petroleum products.
It seems maintaining political equations with its alliance partner has gained precedence over the more delicate issue of raising resources for the cash-strapped government.
Growth in revenue during the first quarter has been much below than targeted this year. The collections in stamp duty and land registration have shown a marginal increase of 8 per cent as against the target of 15 per cent. Even the VAT collections in the first quarter have shown an increase of around 11.8 per cent, as against the target of 25 per cent. However, the only recourse the government has taken is to plug the loopholes in tax collection by making e-filing of trade transactions (for six commodities) above Rs 50,000 (e-trip), and increase the retirement age to 60, and thus defer payment of retirement dues (amounting to Rs 1,000 crore). Another Rs 1,000 crore will be earned through regularisation of illegal colonies.
These measures may, however, not be enough to bring down the state government’s revenue deficit from Rs 4,758 crore in 2012-13 to Rs 1,747 crore this year. For this, the state government needs to mobilise Rs 3,011 crore, which may not be possible considering the slowdown in growth and its unwillingness to impose fresh taxes.
The recent ‘Comptroller and Auditor General report on State Finances for Punjab’ has also recommended that budgetary control should be strengthened in all government departments, particularly in those where savings, excesses have been observed for the last four years. It is also suggested that anticipated savings should be surrendered as and when these are expected so that the amount could be utilised on other schemes. Budget estimates should be prepared with due care so that there were no huge savings, surrenders or excesses over the budget estimates.
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What govt proposed
What it cleared
Revenue deficit
The revenue-raising measures adopted
by the state government may prove lacking to bring down Punjab's revenue
deficit from Rs 4,758 crore in the 2012-13 fiscal to Rs 1,747 crore
this year. If this has to be achieved, the state government needs to
mobilise Rs 3,011
crore, something that may not be possible considering the slowdown in
growth and the government’s unwillingness to impose fresh taxes. The
recent CAG report on State Finances for Punjab has also recommended that
budgetary control should be strengthened. |
