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Bengal bets on VAT to balance books

Calcutta, March 21: The impact of value-added tax (VAT) on commodity prices is anybody's guess, but Bengal finance minister Asim Dasgupta is confident of the government's wallet getting fatter.

Dasgupta, known for his zero-deficit budgets, today presented his proposals for 2005'06 that hope to hold the gap between expenditure and revenue at Rs 5 crore.

Although the overall budget deficit was estimated at Rs 105 crore, he announced additional resource mobilisation ' through a tinkering with the excise rates on liquor ' of Rs 100 crore to narrow the gap to Rs 5 crore.

From increasing allocation under various heads of development to announcing dearness allowance for state government employees, Dasgupta gave a detailed account of the expenditure side of the budget.

He said employment generation was at the centre of his 'alternative approach' to development. Dasgupta was bullish about the state's growth rate, pitching it at 8 per cent for the coming year.

Billing it as the first such increase in Bengal's history, Dasgupta proposed to raise plan expenditure by 68 per cent, from Rs 4,184 crore to Rs 7,051 crore.

But his announcements on revenue generation were restricted to laying down the roadmap for VAT and the recent improvement in tax collection.

'In this (VAT) system, evasion is reduced and tax compliance increases. VAT can, thus, help common people, industries, trade and also the government,' said Dasgupta.

VAT will replace state sales tax and should mean an end to central sales tax too, but the position on this is still not clear. Seven states, most ruled by the BJP, have decided not to implement VAT from April 1. Dasgupta said he would take up the issue with finance minister of these states at a meeting on Thursday.

'Given the state's poor record of revenue mobilisation, if the expectations from VAT are not fulfilled, the crisis will magnify,' said an economist.

The finance minister promised that the existing industrial incentives would continue in the VAT regime. He cut the duty on power produced at captive generating units to 20 paise per unit from 40.

The chambers were high on applause. 'The finance minister has provided a strong foundation for structural reform-led growth,' said Anup Singh, president, Indian Chamber of Commerce.

In the enormous budget speech, Dasgupta gave ample space to agriculture. He released more funds for irrigation, announced a social safety net for poor farmers and promised help in crop diversification.

In the central budget, his counterpart in Delhi, P. Chidambaram, had also focused on agriculture.

The economist-turned-politician did not forget the urban middle class. He announced ending of the practice of hiring government employees on contract and said provision has been made in the budget to pay dearness allowance.

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