India Tax & Regulatory

Indirect Tax Alert

IDTX/2/2011 25 February 2011 In this issue:

Extract of Budget proposals for the States of Gujarat Kerala Karnataka Madhya Pradesh Contacts

Below is an extract of significant tax proposals by Gujarat, Kerala, Karnataka and Madhya Pradesh States in their State Budget announced in February, 2011: Gujarat
Rate of VAT on tobacco and its products proposed to be increased from 20% to 25% (including Additional Tax). Unmanufactured tobacco would continue to remain exempt from tax Rate of tax on mobile phones proposed to be increased from 5% to 15% (including Additional Tax) Generation of all kinds of electrical energy, including captive energy except energy generated from renewable sources proposed to be subject to Green Cess at 2 paise per unit

Kerala
Laterite stone, specified bio fertilizers and all types of nylon and plastic ropes have been proposed to be exempt from VAT Rate of VAT on soil proposed to be reduced from 12.5% to 4% Period prescribed for sales returns proposed to be increased from 90 days to 180 days Assessment of pharmaceutical companies selling medicines to Government proposed to be completed construing the sale price to Government as MRP, retrospectively from1 April, 2005 onwards

Karnataka
Rate of VAT on goods currently taxable at 13.5% proposed to be enhanced to 14% Rate of VAT on declared goods proposed to be aligned with the maximum rate specified on such goods under the Central Sales Tax Act Exemption to paddy, rice, wheat, pulses and rice & wheat products to continue up to 31 March, 2012 Coconut (excluding copra ) and de-oiled rice bran proposed to be exempt from VAT Leasing of feature films and sale of copy rights relating to feature films proposed to be exempt from VAT Rate of VAT on barbed wire proposed to be reduced from 13.5% to 5% Rate of VAT on jewellery, articles of gold and other noble metals, precious and semiprecious stones proposed to be increased from 1% to 2% Multilateral financial institutions such as the Asian Development Bank would be entitled to refund of tax paid on procurement of goods Period of validity of stay orders of the Appellate Joint Commissioner regarding disputed tax proposed to be increased from 120 days to 240 days Time limit for taking up assessment and re-assessment proposed to be reduced from 5 years to 4 years Limit of turnover for mandatory VAT audit proposed to be increased from Rs. 60 lakhs to Rs. 100 lakhs Provision requiring the contractors to submit copy of individual contracts proposed to be eliminated Quantum of penalty for clandestine transport of goods subject to tax at low rates proposed to be increased Rate of interest for delay in payment of tax proposed to be increased from 15% p.a. to 18% p.a.

Madhya Pradesh
Contractors engaged in sale of buildings would be required to pay VAT at 5% on the transaction value after reducing the value of land therefrom. The contractors shall be entitled to input tax credit of goods used in the construction Rate of VAT on the following goods has been proposed to be reduced from 13.5% to 5%: cooked snacks served in restaurants cooked snacks and meal served by caterers other than in restaurants cutlery made of plastics and paper CFL bulbs having sale value up to Rs. 150 foot-valve used in irrigation pumps

 Natural gas for use as fuel in manufacturing units Rate of entry tax on coal proposed to be increased from 2% to 3% Rate of entry tax on iron and steel imported for sale proposed to be increased from 2% to 5% Import of the following goods from outside Madhya Pradesh proposed to be exempt from entry tax: tea imported for blending when the blended tea is transferred / exported outside Madhya Pradesh crude edible oil imported for refining hot rolled coils imported for conversion into coated, colour coated and galvanized coils and subsequent intra-state or export sale of such converted goods

SSource: Budget speech of the Finance Ministers of the respective States

Contacts
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