J&K Budget proposes service tax expansion

As has happened on the last three occasions, Jammu and Kashmir Minister for Finance Tariq Hamid Qarra presented a zero deficit budget in the assembly today. He proposed taxes worth Rs 150 crore in the budget for 2007-08.

Also, as happened last year, Qarra presented a separate power budget in the House. In the Upper House, the Budget was presented by Minister of State for Finance Prem Sagar Aziz.

The finance minister proposed to tax courier services, marriage and banquet halls, private educational and professional institutions, coaching centres, cable networks, insurance, and banking and financial services.

Without specifying tax rates on these services, Qarra told the House that the state government proposed to have a law on service tax. He said these additional services being used by "affluent sections" of society were being brought within the tax ambit.

The finance minister proposed to levy entry tax on all goods for personal use and consumption in conformity with tax rates. A threshold will be set under an Act, beyond which alone there will be levy of entry tax. This measure will yield Rs 10 crore in a year.

Proposing a 5 per cent increase in the rates of basic toll, he, however, exempted light motor vehicles (LMVs) and 'rehras' from the proposed hike. Qarra proposed to enhance the rate on services from 4 per cent to 8 per cent.

He justified increase on the grounds that it had been 4 per cent for quite some time. Also, he pointed out the Centre was levying service tax at 12 per cent under the Central Act. Increase in service tax as well as taxing coaching centres, educational institutions, etc will net Rs 40 crore in a year. He also proposed an additional toll of Re 1 per loaf of bread that came into the state from Punjab.

Qarra said paddy, rice, wheat, pulses, floor, atta, maida, suji and besan were put under the zero category of VAT for one year for currenct financial year, i.e. up to March 2007. "It will be our endeavour to continue exemption of tax on these commodities beyond March 2007 in view of increase in prices," he said.

The minister said this year's budget was Rs 14,163 crore. Expenditure and receipts matched, making it a zero deficit budget. Next financial year's budget (2007-08) will be to the tune of Rs 16,267 crore. Qarra proposed keeping it a zero deficit one.