Former Finance Minister T.M. Thomas Isaac said on Monday that the budget proposals for a one per cent increase in VAT (value-added tax) for a slew of commodities would trigger price rise since the impost would be over and above the excise duty and service tax hike proposed in the latest Union Budget.

Addressing a press conference here, Dr. Isaac said the decision to revise the pension age upwards would in effect mean a ban on recruitment for the next one year. The budget proposals contain new employment schemes, but the success of these would depend on the general economic situation, which is likely to deteriorate further in the coming days.

He said the Finance Minister K.M. Mani's justification for the hike in VAT rates did not hold water. He pointed out that the State government had rejected the Union government's proposal for hiking VAT rates during his tenure as Finance Minister. The LDF government had taken a firm stand that it would not impose any additional burden on the people. Finance Minister K.M. Mani's contention that the State might lose the compensation for the loss of revenue when the GST (Goods and Services Tax) regime is introduced is also baseless. He has proposed to generate a 27 per cent increase in tax revenue by effecting an increase of 8 to 25 per cent in the tax rates for various commodities. The LDF government had maintained tax revenue at an average increase of 20 per cent a year without increasing tax rates. This was possible because the LDF government was able to improve efficiency in tax collection. Mr. Mani is squeezing the people of Kerala to secure higher tax yield, Dr. Isaac said.

The former Finance Minister said that Mr. Mani's budget for 2012-13 had virtually disowned his own White Paper which had drawn a bleak picture of the State's finances.

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