December Elections Weigh On Gujarat; FY13 Budget Offers Tax Sops To Middle Class, Poor
Election year budgets have never failed to disappoint the middle class and the poor in India.
In that context IndiaSpend’s Dhritiman Gupta finds that Gujarat’s budget for financial year 2012-12 (April-March) has lived up to the expectation of this main voting populace.
Gujarat’s Finance Minister Vajubhai Vala has offered tax reliefs that would unburden the person on the street to the tune of Rs 410 crore. The state is slated to hold assembly elections in December.
For a state with healthy finances, high industrial growth and a vibrant agricultural sector, these tax sops balances well with its financial ability.
Healthy Revenue Account
In 2011-12, Gujarat has posted revenue surplus of Rs 1,920 crore. This was much above the budgeted estimate for the same financial year. The surplus is estimated to go up to Rs 3,615 crore in 2012-13.
The revenue receipts grew by an impressive 19% in 2011-12 and were way over what was budgeted for the same period. The revenue expenditures have however been controlled quite well, growing only by 5% in 2011-12.
In agriculture, Gujarat has been witnessing a 10% per cent growth over the last 10 years while the national average has been at 3.3%
The one area of concern for the state is Capital Receipts. In 2011-12, capital receipts were lower than budget estimates. Capital expenditures have been going up. In 2012-13 capital expenditure is estimated to grow 42%, as against the 39% registered in 2011-12.
Here are the tax reliefs proposed in the Budget of FY13
Proposed Tax Reliefs
| Tax Heads | Proposed Relief (in Rs. crore) |
| Value Added Tax | 200 |
| Stamp Duty | 10 |
| Electricity Duty | 200 |
| Total | 410 |
Source: Gujarat Budget Speech 2012-13
Now, let’s look closely at state of Gujarat finances
Gujarat Financials
| 2010-11 | 2011-12(BE) | 2011-12(RE) | 2012-13(BE) | |
| Revenue Account | ||||
| 1) Revenue Receipts | 52,363 | 59,885 | 62,292 | 75,903 |
| 2) Revenue Expenditure | 57,440 | 59,442 | 60,371 | 72,288 |
| Revenue Surplus(+)/ Deficit(-) | -5,076 | 443 | 1,920 | 3,615 |
| Capital Account | ||||
| 3) Capital Receipts | 17,055 | 21,394 | 18,778 | 22,331 |
| 4) Capital Expenditure | 14,189 | 19,794 | 19,763 | 28,119 |
| Deficit(-)/Surplus (+) on Capital Account | 2,866 | 1,599 | -985 | -5,788 |
(Figures in Rs crore)
Source: Gujarat Budget Speech 2012-13
Let’s take a look at the proposed planned outlays across sectors
Planned Sectoral Outlays
| Head | Provision (in Rs. crore) | % of Total Provision |
| 1. Agriculture and Allied Activities | 3,075 | 6.07 |
| 2. Rural Development | 1,479 | 2.92 |
| 3. Special Area Program | 147 | 0.29 |
| 4. Irrigation and Flood Control | 11,700 | 23.12 |
| 5. Energy | 3,790 | 7.4 |
| 6. Industries and Mines | 2,473 | 4.8 |
| 7. Transportation | 4,961 | 9.8 |
| 8. Communication | 650 | 1.2 |
| 9. Science and Technology | 401 | 0.79 |
| 10. General Economic Services | 1,528 | 3.0 |
| 11. Social Services | 20,308 | 40.1 |
| 12. General Services | 83 | 0.16 |
| Total | 50,599.00 | 100 |
Source: Gujarat Budget Speech 2012-13
A large portion of the expenditure, 40% or Rs 20,308 crore, has been earmarked for Social Services which include education, sanitation, and welfare of backward classes.
The agriculture sector has been allocated Rs 3,075 crore, 6% of the total outlay and irrigation and flood control sector gets Rs 11,700 crore or 23% of the outlay. The combined figure accounts for 29% of the total outlay.
Such investments could help sustain high growth rate the agricultural Sector has seen in the past ten years.
Energy has been allocated Rs 3,790 crore, 7.4% of the total outlay and transportation Rs 4,961 crore, 9.8% of the total outlay.
Tax Reliefs
The Budget proposals included value added tax concessions, mostly favouring religious rites, reducing taxes on agarbatti and poojathali.
Taxes were also cut on items required to build homes to give incentives to people to own homes.
Value added tax has also been slashed on food items like yogurt, butter, paneer (cottage cheese) and cheese from 15% to 5%. Items like Palia, chikki and revdi (sweets) were exempted from taxes. Medical implants required for heart diseases were exempted and so were blood bags. Incentives were also provided to switch to battery-operated eco-friendly vehicles by reducing such taxes from 15% to 5%.
These cuts would provide a relief of Rs 200 crore.
Let’s look at where the Value Added Taxes were cut.
Gujarat's Various Tax Cuts
| Tax Rate | Previous Tax Rate (%) | Current Rate (%) |
| 1. Items required to Build house-Hinges butt, Lock handle, shelves etc. | 15 | 5 |
| 2. Battery-operated vehicle | 15 | 5 |
| 3. Medical Implants for heart disease | 5 | 0 |
| 4. Blood Bag used to transfer and storage of human blood | 5 | 0 |
| 5. Helmets | 15 | 5 |
| 6. Manglorinalia used to build houses in rural areas | 5 | 0 |
| 7. Aquatic Food | 15 | 0 |
| 8. Toys( except electronic and battery operated) | 5 | 0 |
| 9. Incense Sticks (Agarbatti) | 5 | 0 |
| 10. Religious items like poojathali, Agarbatti stand etc. | 15 | 0 |
| 11. Loban and Googal to create aroma during pujas | 5 | 0 |
| 12. Threads used to fly kites and firkin | 5 | 0 |
| 13. Palia ,chikki and revdi | 5 | 0 |
| 14. Yogurt ,butter, cheese and paneer | 15 | 5 |
| 15. Tapioca | 15 | 0 |
| 16. Ribbon, sari pin ,broach and kajal | 15 | 0 |
| 17. Tools meant for tailor and barber (except shaving blade) | 15 | 5 |
| 18. Sanitary Napkins and Diapers. | 15 | 5 |
Source: Gujarat Budget Speech 2012-13
The applicable rate of electricity duty in respect of residence and education categories is proposed to be reduced by 25%. This entails a relief of Rs 200 crore.
A proposal was also made to increase the limit for stamp duty exemption on the instruments executed bythe Self Help Groups/ SakhiMandals for securing loan/borrowings up to Rs 2 lakhs. These exemptions would provide a relief of Rs 10 crore.
