GUJARAT

TAXATION

Government committed to Tax Reforms

The State Government is committed to bring about reforms in the regime of taxation and in fact, had already initiated an agenda in this direction. In order to have the right perspective, the details of the reforms agenda and results thereof are given briefly hereunder.

1. Tax reforms with emphasis on ratioanlisation, simplification, transparency and harmonization in rate structure.



2. Reduction in input taxation under the State Sales Tax regime.



3. Removal of cascading and multiplicity of commodity taxes.



4. During last six years, conscious effort has been made to ensure that resource mobilization does not result in unbearable burden on industry. To the extent possible, tax burden on industry has been reduced. Consequently, weighted average rate of sales tax in Gujarat is now 12% as against higher rates in other states. Barring 16 commodities, input taxation in Gujarat is 2% as against the rate of input taxation of 3-4%.



5. Consistency in the approach based on the above policy -
   
   
   • has been appreciated by local trade and industry,
   • has provided stability to rate regime as against unpredictability of tax burden in many other states,
   • has enabled the state to understand revenue trends, and
   • has resulted in the decline in the overall burden of taxation on industrial sector.


6. Reforms in sales tax structure so far carried out are in tune and harmony with Value Added Tax (VAT). Most other states have been taken steps, which are not in tune with VAT. The State of Gujarat has taken necessary preparatory steps for introduction of VAT.

Highlights of Sales tax reforms since 1997-98

1. Element of turnover tax subsumed in basic rate of sales tax.



2. Numbers of sales tax (main) slabs have been reduced from 17 to 6.



3. Levy of additional tax (surcharge) has been abolished from 1st March 03. Industries have benefited by 10% reduction in their tax burden.



4. Input taxation and prohibited list: In respect of 73 commodities set off of the tax paid on the purchase was not available prior to April 1997. This resulted in cascading of tax for industries. Number of such commodities in the list of prohibited goods has been reduced to sixteen by April 2002. Out of these 16 commodities, four commodities carry the rate of sales tax at 4%, which is the rate of purchase tax/input tax in most other states. Barring these 16 commodities, input taxation on other commodities is just 2% as against the average rate of input tax of 4% in other states.

The reforms listed at (i) to (iv) above have resulted in reduction in the burden of sales tax on industry and trade to the extent of Rs.590 crore per year.

Competitive Taxation Environment

It is important to offer a level playing field in the matter of taxation to the industries in Gujarat to become globally competitive. The Government therefore will strive to reform the tax regime further by rationalizing the structure in the times ahead. This would help promoting scale of manufacturing, which ultimately leads to the development of technological and marketing capabilities in our manufacturing companies in their efforts to becoming global Indian MNCs.

Stamp Duty

Advalorum rates of stamp duty applicable for commercial transactions and industrial activities are subjected to maximum amount on concessional basis.

1. In respect of industrial loans, maximum stamp duty payable is only Rs. 2 lakh irrespective of the loan amount.



2. In respect of documents relating to amalgamations and merger, securitisation, pledge and hypothecation, etc., maximum amount of stamp duty is subject to suitable ceiling limits.