Budget> Budget Part - B
Budget Part - B
Speech of the Hon'ble
Finance Minister Shri Vajubhai Vala for Budget 2005-2006
delivered on August 2005
Hon’ble Speaker Sir,
As a result of sound financial administration and development oriented economic
policies implemented by our Government to strengthen the economic condition
of the State, the overall surplus as per the Budget Estimates for the year
2005-06 will be Rs.87.14 crores.
(2) When we have come out of deficit and reached a position of surplus,
due to consistent and effective efforts of our Government, the State Government
has decided to continue the efforts to make the tax structure simpler, rational
and effective. Since there will be overall surplus in the Budget Estimates
for the year 2005-2006, our Government has decided to provide as much tax
relief as possible, considering various aspects such as encouraging education,
providing boost to trade, commerce and industry.
(3) It has now become essential to look at taxation considering globalization,
economic liberalization, problems of trade, commerce and industry etc. so
that trade, commerce and industry and the State as a whole achieve a rapid
(4) Now, I present the tax proposals for the year 2005-2006.
Value Added Tax
(5) This August House had passed the Gujarat State Value Added Tax Bill,
2003, in March, 2003. The Bill was thereafter submitted to the Government
of India for obtaining Presidential assent.
(6) However, in view of detailed discussions that took place, it was decided
by the Government of India in May,2003, to postpone implementation of Value
Added Tax Act. The spirit of these discussions was: (a) Similar provisions
should be made in the Value Added Tax Act of all the States; and (b) Value
Added Tax will be effective only if it is implemented simultaneously by
all the States.
(7) In the meanwhile, as deliberated upon in the Empowered Committee of
the State Finance Ministers, it has been decided that each State will make
necessary amendments to incorporate the "common points of convergence"
agreed to in the Committee in their respective Value Added Tax Act.
(8) A "White Paper" on the State Level Value Added Tax has been
published on 17-1-2005 by the Empowered Committee.
(9) The President of India has already given assent to The Gujarat Value
Added Tax Bill, 2003 on 17-1-2005. On receiving the Presidential assent,
the Gujarat Value Added Tax Bill, 2003 has been published as Act No.1 of
2005 in the gazette dated 25-1-2005. Therefore, the Gujarat State Value
Added Tax Act, 2003 needs to be amended keeping in view the "common
points of convergence" and the "White Paper".
(10) At this stage, it is important to ensure that the Value Added Tax is
implemented simultaneously by all the states. The Value Added Tax will serve
the purpose only if this is ensured. Thus, it is our submission to the Central
Government that if the Value Added Tax is to be implemented with effect
from 1/4/2005, it should be ensured that agreement is arrived at by all
the States expeditiously to implement it simultaneously. If some of the
States do not agree to implement Value Added Tax, it will create problems
not only for the Value Added Tax but also for the trade & industry.
Therefore, it will be proper that all the States implement the Value Added
(11) To control air pollution in the State, the Government has adopted the
approach to encourage the usage of CNG operated vehicles in the entire State
including Ahmedabad. As a part of this approach, I propose to fully exempt
from sales tax the CNG kits, which currently attracts 8% sales tax. It is
expected that buses, taxies and autorickshaws will get maximum benefit from
this tax exemption.
(12) In order to accelerate the development of trade and industry in the
state and at the same time maintain the tax revenues of the State, the approach
of the State Government is to make the tax structure simpler and rational.
(13) As a part of this approach, the State Government has given in earlier
years relief in phased manner to the various consumers of electricity with
a view to reducing the tax burden.
Relief given earlier in taxes and duties on electricity
(14) Relief of Rs.58 crores was given by way of reduction in the rate of
electricity duty benefitting 65 lakh domestic consumers.
Sales tax on electricity in force for 18 years was abolished on 1-4-2002
giving relief of Rs.260 crores benefitting about 90 lakh consumers.
Relief of Rs.62 crore was given to 12 lakh consumers belonging to commercial
and residuary categories.
About 6,51,000 farmers have been given relief by abolishing duty on electricity,
used for irrigation, in force for 22 years.
In all, our Government has given relief amounting to Rs.400 crores to electricity
consumers of all the above mentioned categories in the last few years.
More relief in electricity duty
(15) As a part of pushing forward the process of making the tax structure
simple and rational in the electricity sector, I hereby propose more relief
in the duties on electricity.
Recognised Educational Institutions
(16) I propose to reduce the rate of electricity duty from 20% to 15% for
the recognised educational institutions in the rural areas in order to provide
relief to such institutions including hostels for girl and boy students.
I propose to reduce the rate of electricity duty from 25% to 20% for the
recognised educational institutions in the urban areas for consumption up
to 40 units.
I also propose to reduce the rate of electricity duty from 40% to 35% for
consumption in excess of 40 units.
Reduction in these rates would bring down the maintenance cost of the educational
institutions which in turn would encourage educational activities.
(17) Service Undertakings include units engaged in repairs, renovation,
assembling, electronic data processing, cleaning activites etc. I propose
to reduce the rate of electricity duty from 30% to 15%. on the motive power
consumed by these units. The reduction would provide substantial relief
to the service undertakings functioning in rural and urban areas and bring
down their expenses towards electricity duty.
Residuary category of consumers
(18) Residuary category of consumers mainly include small shopkeepers, godowns,
traders and professionals, research institutions, private libraries, private
educational institutions, telephone service, cable service, private dispensaries
and hospitals with profit motives, T.V. studio, petrol pump, Gas station,
refilling plants, STD, PCO, Ice-cream parlour, grocery store, provision
store, Pan shops, confectionary shops, vegetable vendors, Xerox copiers,
Bookstalls and stationery shops, tailors and barbers etc.
The current rate of electricity duty on these types of electricity consumers
is 45%. I propose to reduce this rate to 35%.
Reduction for the residuary category of consumers would give relief to a
large section of the society engaged in small businesses and professions,
which would gear up the self employment activities and increase employment
Hall, Auditorium, Theaters
(19) The rate of electricity duty on Hall, Auditorium and Theaters is presently
45%. In order to encourage industries like entertainment and tourism, I
propose to reduce the rate of electricity duty to 35%.
Hotel and restaurant
(20) The Hotel and restaurant industry has made significant development
in the state. In order that this sector develops further, I propose to reduce
the rate of electricity duty from 45% to 35%.
(21) At this juncture, I want to draw the attention of this House that the
proposals to reduce the rates of electricity duty from 45% to 35% in the
above mentioned different categories would provide benefit to more than
12 lakhs of consumers of different sections of the society. Providing such
a big relief at a time in the electricity duty would be a rare occasion.
This would mainly benefit the poor, middle class and the self employed running
their own units.
(22) Gujarat has achieved a distinct place in the country in industrial
development. The State Government has announced Gujarat Industrial Policy-2003
to provide impetus to industrial activities in the state. Various schemes
have been announced under this policy with the purpose of encouraging industrial
development. It was under consideration of the State Government to reduce
the burden of electricity duty on the industry so that it can develop further,
can compete with the industrial units of other states and can face the global
challenges with vigour. Accordingly I propose to reduce the rate on electricity
duty from 20% to 15% in respect of the industrial units consuming High Tension
(H.T.) energy. This relief would help the industry to become more competitive
and make further progress.
Residuary Category of consumers in self generation
(23) The rate of electricity duty for the residuary category of consumers
in self generation is 70 paise per unit. I propose to reduce it by 30 paise
and make it 40 paise per unit. The reduction would provide relief to consumers
who are engaged in storing and transporting petroleum products and the contractors
engaged in temporary works.
(24) With the changes as suggested above, the maximum rate of electricity
duty would now come down to 35% from 45%. Also, the slabs of electricity
duty would come down to 4 from 8. The maximum rate of 70 paise per unit
in the self generation sector would now come down to 40 paise per unit.
These changes will bring about simplification in administration also.
(25) There will be an estimated reduction of Rs.229 crores in the revenue
from electricity duty on account of all the above tax relief. However, these
reductions would provide significant relief to trade and industry, including
the recognised educational institutions and provide momentum to the development
process. The State economy would become vibrant, tax compliance would increase
and the revenues of the state would also increase. The remaining deficit,
would be brought down by economy measures.
(26) The final position of the Budget Estimates for the year 2005-06 will
be as follows :
|Surplus as per Budget Estimates
|Proposed relief in taxes
|Estimated overall deficit
I commend the Budget for the consideration of this August House.