The Madhya Pradesh government will be paring value-added tax (VAT) on petrol and aviation turbine fuel sold in the central Indian state in the coming financial year.

In his Budget 2012-13 speech, finance minister Raghavji has announced that the government was aiming to rationalise taxes as committed in the previous budget speeches, adding that a cut in VAT on petrol and ATF would provide more comfort to commoner.

Also, to make the states traders feel easy, the Budget proposal, presented two days ago, extended the limit for only return filing facility to those who have an annual turnover of Rs 60 lakh and Rs 30,000 composition. At present, all those who have more than a turnover of Rs 20 lakh or Rs 10,000 composition are required to deposit tax.
The minister has slashed the VAT on petrol by 1.75 per cent from existing 28.75 per cent, and 4.75 per cent on ATF to reduce it to 23 per cent from the existing 27.25 per cent. From now onwards, petrol and diesel will attract multi-stage VAT, he added.

Further, the government has rationalised the entry tax by halving the rates to 1% on certain items defined in schedule 1 and 2. Further, cotton and cotton-waste yarn will be exempted from entry tax. Other items specified in schedule-1 will attract one per cent tax.

Similarly, certain goods specified in schedule-1 of the VAT Act will attract 2 per cent entry tax from the existing 5 per cent. It would put an additional financial strain of Rs 50 crore on state exchequer, Raghavji noted.

Certain items like khakhra, khaskhas, PCC polls, adult diapers and sanitary napkins besides photography papers and aluminum sheets will now attract 5 per cent VAT from the existing 13 per cent.

The speech, though, contains certain text that created confusion, as the schedule 1 of the VAT does not have any part as defined in the Budget speech.

The professional tax exemption limit in the state has also been enhanced from Rs 1.20 lakh to Rs 1.50 lakh. This would be a direct revenue loss of Rs 15 crore to state exchequer, Raghavji said.

Small- and medium-scale industries brushed aside the budget proposals of lowering stamp duty registration fee, even as the minister proposed a Rs 10-crore loan mortgage paper-stamp fee from 0.50 per cent to 0.25 per cent. This would be available for housing loan too, he announced.

Similarly, education loan documents will also attract only Rs 100 fee in lieu of 0.5 per cent of the total loan value. The land development papers for colonisers will attract only 1 per cent stamp duty from existing 3 per cent. Any judicial document used for mortgage purpose will attract only Rs 1,000 registration fee. This would put an additional burden of Rs 20 crore on the state kitty.

On the other hand, traders said the state government ignored them completely as the government has raised the VAT on bidi from existing 5 per cent to 13 per cent. Federation of Madhya Pradesh Chambers of Commerce said said this would encourage tax evasion. Also, there can be illegal transportation of the commodity, added Kailash Agrawal, an office-bearer of the body.