Calcutta, June 23: Finance minister Asim Dasgupta today cut stamp duty, which is charged on transfer of property, in his budget that showed the impact value added tax has had on revenues.
In Calcutta and Howrah, the duty will now be 6 per cent, down from the rate of 8 per cent that was charged in all municipal areas plus an additional 2 per cent levied in these two cities.
For municipal areas, a euphemism for urban zones, the duty will now be a uniform 6 per cent and for rural areas 5 per cent, down a percentage point.
The real estate industry was euphoric. Santosh Rungta, the vice-president of Credai (the industry body), said: “It should result in a direct benefit of around 5 per cent to the home-buyer, and if one takes into account the resultant reduction in land acquisition cost, the cumulative savings for the customer should be almost 7 per cent.”
Before the celebrations begin, however, bear it in mind that India-made foreign liquor will be costlier by 2.5 per cent. Soft drinks and mineral water will now be taxed on the maximum retail price and should cost more.
Buoyancy in revenue brought about by VAT is apparent in the budget numbers. VAT was introduced on April 1, 2005, and in the first year collections have grown by about Rs 800 crore. The growth projection for the current year is Rs 1,114 crore, nearly 70 per cent of the increase expected in total tax revenue.
Thanks to VAT and economic growth ' state domestic product is projected to expand in 2006-07 by 8.5 per cent compared with 7.8 per cent in the last five years ' Dasgupta has kept his additional revenue mobilisation target low at Rs 46 crore, less than half of 2005-06.
The stamp duty cut is a result of pressure from investors who have found it to be too high ' a situation that worked against chief minister Buddhadeb Bhattacharjee’s industrialisation effort ' and from the Centre.
Bengal was unable to get access to the National Urban Renewal Mission fund because one of the conditions was that stamp duty could not be any higher than 5 per cent. At 6 per cent, it has now come within a whisker of the cut-off.
The state had told Delhi that the duty could not be cut to 5 per cent at one go and would be lowered gradually.
“It brings the state closer to accessing the urban renewal fund. The next logical step would be to abolish, or at least dilute, the Urban Land Ceiling Act, which is another roadblock,” Rungta added.
Industry lobbies welcomed the move but reminded the government that a number of states had already reduced the duty to 5 per cent. “There has to be rationalisation to encourage increased industrialisation,” said Nazeeb Arif, secretary-general of the Indian Chamber of Commerce.
Many companies have complained about the high stamp duty, a recent example being a multinational bank, which is setting up back-office operations here. It called for overhaul of the entire property tax structure.