Siddu's VAT will be focus of today's budget

BANGALORE: "Maanavanagi huttida mele enenu kandi..." (Have you seen enough of the world since your birth?). Siddaramaiah may as well belt out this popular number from a Rajkumar movie on Friday, for the whole country will watch whether he''ll be the first state finance minister to give a definite shape to Value Added Tax (VAT).
As much as VAT, political pragmatism is bound to define this budget.Every quarter expects some sop or the other. So what will budget have?
There may not be a single-shot answer to the question, but it is safe to say that the FM may strike a balance between populism and fiscal prudence, seeking to focus on urban as well as rural constituencies.
Yet, the deputy CM cannot be dubbed populist just because he chooses not to cut the salaries and pensions Bill or refrain from bringing in agriculturists under the tax and user charges net. But he has an option to appease many by waiving loans, keeping foodgrains and pulses out of the VAT regime and going soft on illegal IP sets.
Special packages for backward regions and primary education and healthcare may get a lion''s share of the outlay. Likewise, there are quarters which expect the FM to exempt silk, a major raw material grown in the state, from VAT.
With Karnataka, fiscal prudence has been necessitated for consistency rather than by choice. The state''s fiscal health has been on an upward trend ever since the S.M. Krishna government passed the Fiscal Responsibility Act and went about sticking to the schedule in many cases. The credit goes to Siddaramaiah for not giving in to political compulsions. Instead, he created a tax tool called Special Entry Tax (SET) which plugged flight of trade and exhibited promising returns in terms of tax collections. SET, as the finance minister admits, will continue despite the VAT regime. In fact, tax experts expect 160 more items to be added to SET, taking the total under this tax to 183.
There is speculation that the finance minister may concede the whitepaper recommendation to make SET VATable. If that happens, SET becomes a completely mature regime.