A preview of Jammu & Kashmir budget

There is hardly any attention on State Budgets which needs to be corrected. State budgets matter more from its impact on local populations.

This blog has enjoyed several pieces written by Dr. Haseeb Drabu. Now he is the finance minister of the state (headed J&K bank as well), which is really interesting.

Here is a short article on the J&K budget presented recently:

“I am asserting that I shall not go with a begging bowl to New Delhi. This despite the fact that we not only have a friendly government at the Centre, we also have an exceptionally sensitive and accommodating Union Finance Minister. By doing so, I do hope to restore the dignity of the people of J & K who are forever being accused of surviving on subsidies and largesse. The goal of our government is economic self-reliance and fiscal autonomy.”

– Haseeb Drabu, Finance Minister, Jammu & Kashmir

A former banker, editor and now full-time politician,regarded as a “renegade” by Kashmiri separatists who once believed he was one among them, has just set the tone for budget-making for Indian states in the era of Narendra Modi. In line with the Prime Minister’s intention to devolve more power and finances to the states, the seasoned Drabu, 54— economist from Delhi’s Jawaharlal Nehru University, former bank chairman, former columnist with Mint, editor of business-standard.com and member of legislative assembly from Rajpora, J&K—presented last week abudget that aimed at financial independence.

“I shall not seek any financial assistance or grants from the Centre other than what is provided for in the Constitution of India for all the special category states as a part of the federal fiscal system,” said Drabu, author of the first budget of the People’s Democratic Party (PDP)-Bharatiya Janata Party (BJP) alliance

Some nice things to note. J&K is the only state which can tax services. So far it has not attempted to tax these services. Now it will:

“J&K is the only state in the country that has the power to tax services,” he said. “By virtue of the Goods & Services Tax (GST) Act, J&K has the power to tax both goods and services. All other states of India have the power to tax only goods. The moot point is that J&K is a special taxation area. Given the fact that according to latest estimates, service sector constitutes 57% of the GSDP (gross state domestic product), its contribution to the state exchequer is next to nil. So far, we have not been able to tap the entire potential of this sector.”

So, included under the tax net now are advertising agencies, security services, placement services, salons and health clubs. This should generate Rs 150 crore.

Services make up nearly 60% of India’s gross domestic product, and services are taxed in India based on the negative list regime (not covered under service tax act including services provided by central/state governments and RBI). IndiaSpend had earlier reported how service tax collection was expected to be higher than other taxes in 2014-15.

Then there are other standard things like cutting expenditure, sticking to basics and so on.

Nice to see fiscal basics at state level. Hope the govt continues and Drabu gets a full term to walk the talk..

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