Punjab hopes entry tax on vehicles will boost revenue

Punjab Finance Minister Parminder Singh Dhindsa will present the Budget proposals for the year 2013-14 in the state Legislative Assembly on March 20. According to government sources, the Budget is likely to focus on the social sector and address the rising and revenue deficit.

According to the state government data, the fiscal deficit stands at Rs 6,148.54 crore during April-December 2012 against Rs 3,308.54 in the year-ago period. According to the Budget document, the fiscal deficit is likely to be Rs 8,923.92 crore (3.26 per cent of GSDP) for 2012-13 as against Rs 9,633.22 crore for 2011-12.

The revenue deficit has already surpassed the Budget estimates for 2012-13, making it virtually impossible for the Government to bridge the gap now. In April-December 2012, the revenue deficit touched Rs 5,090 crore against the Budget estimate of Rs 3,123 .30 crore for the fiscal year. In the year-ago period, it was Rs 2,670.62 crore. During 2011-12, the revenue deficit touched Rs 6,838 crore against the revised Budget of Rs 5,584.38 crore.

Last week, the state Cabinet had taken some steps to increase its revenue receipts. It gave its nod to increase the rate of VAT on cigarettes and cigars from 20.5 per cent to 50 per cent along with a 10 per cent surcharge. Likewise, in a step aimed at checking corruption in revenue collection, the Cabinet also gave nod to amend the Punjab VAT Act to introduce e-TRIP or e-Transportation Information within Punjab (a virtual information collection centre for goods moving in the state). This amendment would help in generating additional revenue of about Rs 200-300 crore annually. It also gave approval to levy an entry tax on motor vehicles at the rate specified in Section 3(5) of the Punjab Tax on Entry of Goods into Local Areas Act 2000, that is, the difference between VAT rate inclusive of additional tax in the state and the tax paid by the person while importing the vehicles.

Spending on account of salaries, pensions, interest payments and power subsidy are the main reasons behind the state's rising fiscal and revenue deficit. From being revenue-surplus in the 1960s and 1970s, Punjab now has one of the highest deficit among major states (budgeted at 3.88 per cent of GSDP for 2011-12).

Earlier, in an interaction with Business Standard, Dhindsa expressed his concern over the rising wage Bill, including pension bill, which is growing at the rate of over 20 per cent.