Southern States - Tamil Nadu   

Tax on rentals of landlines, cellphones

By R. Gopalakrishnan

CHENNAI March 21. The levy of tax on the rental of phones, including cellular telephones, retention and expansion of the entry tax, revamping of the electricity tax and a proposal to introduce the value-added tax system after obtaining the sanction of the President for introducing a bill (whose draft has already been notified) were among the major announcements made by the Finance Minister, C.Ponnaiyan, while presenting the budget today.

The VAT, to be introduced in the current fiscal year, would be based on an agreement reached at the all-India level in respect of tax rates (four per cent for industrial inputs and essential items, 12.5 per cent for all other goods, list of exempted goods, a non-VAT regime for bullion, jewellery and special rates of tax for petrol, liquor, diesel, IMFL, etc), while deemed sales and tax on food and drinks will be outside the VAT.

The VAT regime would provide for zero rating of exports, while no setoff on tax paid on inputs would be available for branch transfers to other States. All units availing themselves of sales tax waiver (under the earlier industrial policy) would be brought under the ST deferral regime. Rice would continue to be exempted from tax even upon introduction of the VAT in view of drought.

The existing resale tax, additional sales tax (turnover tax) and infrastructure surcharge will "stand withdrawn" once the VAT is introduced, according to the Minister. However, the AST on IMFL and foreign liquor, which are outside the VAT, will continue. For petrol, diesel, etc, the AST and surcharge will be merged with the basic tax.

Citing a recent Supreme Court judgment holding that phone rentals "satisfied the requirement of transfer of the right to use goods", the Minister announced a levy of 12.5 per cent tax on rentals collected by the BSNL and private operators, including rentals on mobile telephones. This will take effect from today.

The Minister said it had now been decided to levy entry tax on washing machines at 12.5 per cent and on low-density polyethylene and polypropylene in all forms, including granules, tapes and wastes at four per cent. Entry taxes levied in the last two budgets with a facility for setoff "have yielded good results in terms of checking unaccounted transactions and mobilising revenue," he said. Paper used in job work entrusted to printers by agencies and departments of other State and Union Territory Governments would be exempted from entry tax on production of proof of job work.

The luxury tax on jewellery stocks is being increased from one to three per cent, along with implementation of the VAT, under which the tax rate on jewellery would come down from two to one per cent for all dealers and the compounding system would be cancelled.

Electricity tax

Based upon the recommendations of the Tax Reforms and Revenue Augmentation Commission, under the chairmanship of Raja J.Chellaiah, but with some modifications, the Government decided to introduce a new legislation on Electricity Tax. This will provide for levy of a minimum rate at five per cent and a maximum rate of ten per cent on the net charge for energy sold by all licensees, including captive power plants.

For captive plants, the bill will provide for levy of tax at a minimum of 10 paise and a maximum of 20 paise a unit consumed for their own use. No tax will be levied on the sale of electricity for agriculture and hut service connections. The actual rate of tax on sale of electricity will continue to be five per cent as at present and for own consumption by captive plants it will be 10 paise a unit. This "rationalisation" will yield Rs. 80 crores during 2003-04.

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Stories in this Section

• Ponnaiyan emphasis on reform priorities
• Govt. pulling out of manufacturing sector
• Green levy imposed on old vehicles
• Tax on rentals of landlines, cellphones
• `Black' humour, brief bonhomie and noisy protest
• Marginal rise in petrol, diesel prices
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