New tax surcharge on the cards in MP Budget

Govt plans to raise commercial tax collection to Rs 5,500 cr

The Madhya Pradesh government is likely to introduce a new surcharge on commercial taxes, raise the entry-level tax on certain commodities and reduce taxes on automobile components in the forthcoming Budget.

The existing Jabalpur earthquake surcharge on commercial tax is likely to stay. The Budget will be presented on July 12, when the Assembly session resumes after a gap of 13 days.

"The state government has almost finalised a decision to impose a new surcharge of 2 per cent to create a fund for employment generation among the tribals," government officials told Business Standard.

This, according to sources who are in talks with the state government, will generate an additional Rs 100 crore for job creation among the tribal population.

The government has created an employment board to create new jobs. "The government has chalked out a plan to raise the commercial tax collection target from Rs 4,000 crore to Rs 5,000-5,500 crore during 2004-05," said an official.

Though Finance Minister Raghavji declined refused to comment on the Budget, but he said the government would introduce or raise some taxes or surcharges. He also hinted that the government would be soft on certain items and some taxes would neither be reduced nor increased.

The state government, according to sources, has taken a decision to extend the dates of notification till March 31, 2005. These notifications (about 75 in number on various commodities and items) are issued in favour of industry to continue with the existing tax rates.

"The government has also taken a decision to revise the professional tax and a cess on captive power generation is also likely to be reduced, but it will not be done away with," officials said.

"The tax on automobile components, which is levied at the rate of 13.8 per cent, will be reduced to 8 per cent, but not to 4 per cent as demanded by the industry. The cess on captive power is also likely to be reduced, but a final decision is yet to be taken," he added.

The state government levies a 20 paise cess on captive power generation. In its pre-Budget memo, the PHDCCI had sought the removal of the cess.

"Tax on agriculture irrigation pump starters (electrical) is likely to be reduced to 4 per cent from existing 8 per cent, the entry tax on electric generators will be raised from the existing rates to 4 per cent and the mandi tax on all commodities is likely to be reduced from 2 per cent to 1 per cent," they said. "Besides, the entry tax on transformers and high-density polythene is also likely to be raised to 5 per cent."

Stamp duty for residential and non-residential properties is also likely to be reduced from the existing 10 per cent (including education cess and panchayat cess) to 8 per cent. "Banks had demanded a reduction in the stamp duty in the state so that they extend more credit, particularly to rural areas," sources said.

Chief Minister Uma Bharti will have to do a tight-rope walk on the Budget. The heavily-taxed state industry has been demanding reductions in a number of taxes, including 9.2 per cent value-added tax introduced by the Digvijay Singh government in 2002.