Bengal Budget to cut fiscal deficit to 1.96%

West Bengal Finance Minister, Amit Mitra
West Bengal Finance Minister Amit Mitra on Friday presented a tax-free Budget for 2016-17, even as he proposed to cut his government’s fiscal deficit to 1.96 per cent of gross state domestic product (GSDP), against 2.68 per cent in 2015-16.

Displaying commitment to fiscal prudence, Mitra proposed to eliminate revenue deficit from next year, from 1.03 per cent last year, and initiated several tax reforms such as digitisation of tax payment procedures and abolition of the tax dispute settlement commission.

In his first Budget after the Trinamool Congress returned to power in the state early this year, Mitra said he would increase his government’s own-tax collections from 4.57 per cent of GSDP last year to 5.13 per cent in 2016-17. Mitra is relying on compliance for higher tax collections.  

Mitra gave a boost to the government’s capital expenditure by proposing to increase the Plan outlay by nine per cent against the revised estimates of 2015-16. However, the state government's debt situation also worsened as its total debt was set to increase from 32.46 per cent of GSDP in 2015-16 to 33.72 in 2016-17.

Last financial year, the state overshot its expenditure target to ~53,101 crore (revised estimates 2015-16), representing 34 per cent increase in expenditure over 2014-15, an all-time record, said Mitra.

With the outstanding debt projected to touch nearly ~3.34 lakh crore in 2016-17, unlike in some of the previous Budgets, the state has shied away from introducing any major social welfare scheme, barring a few in the education sector. At the same time, the state has refrained from introducing any revenue stream to garner additional funds.

Since 2011, when the TMC came to power, the state took a debt of nearly ~1.13 lakh crore. Out of this, nearly ~94,533 crore was used for debt servicing alone, said Mitra.

The state’s tax revenue rose around nine per cent in 2015-16 to ~42,920 crore in 2015-16 (revised), against ~39,412 crore in 2014-15 (actuals). However, the state missed its target of ~46,497 crore, as set in Budget 2015-16.  

Observers said the move to do away with the settlement commission — introduced for mutual settlement of long disputed tax issues — could be a step towards the state’s preparation for GST. “The aim of the commission was to settle long-pending disputes. With GST, the commission will have no relevance,” said Timir Baran Chatterjee, tax expert.  
Mitra said nearly 8,000 cases have already been resolved through fast-track courts and there was no need for further extension of the commission.

The state also raised the tax exemption limit on profession tax to ~10,000 a month, from ~8,500 earlier. This apart, the state would not go for litigation where the disputed amount in the appeal order was less than ~1 lakh.

As part of its digitisation plan, the state has done away with the requirement of submission of paper TDS certificate, replacing it with an online system. To reduce litigation, the time limit for disposal of appeal cases in VAT has been reduced from one year to six months. With a view to providing relief to the tea industry, the exemption from payment of rural employment and education cess has been extended by one year.

In the education sector, the government has introduced an e-learning initiative with an outlay of ~100 crore. It has also rolled out a scholarship scheme for low-income groups with a corpus of ~200 crore.

According to Mitra, the increase in the state Plan outlay had led the state GSDP to increase in 2015-16 to ~9,20,083 crore, against ~4,60,959 crore in 2010-11.

A day after West Bengal Chief Minister Mamata Banerjee proposed three debt-ridden states — Kerala, West Bengal and Punjab — enter into a discussion for debt restructuring, Mitra made a strong pitch for such a move.

“The Centre can lend $10 billion to Greece; can they not give it to us? Neither the UPA nor the NDA regime have considered our requests for a moratorium,” said Mitra. “The Left Front borrowed heavily from the market by issuing bonds without thinking about future repercussions. Now we are paying for it. These are sovereign debt instruments and we cannot deny payment to those who purchased them.”

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