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Indian Budget 2007-08- Full Text of Budget Speech

XI. PUBLIC FINANCE


113. Thanks to the Fiscal Responsibility legislations, the Central Government and the State Governments have regained lost fiscal ground. Rs. 110,268 crore of States' debt has been consolidated. Twenty States have availed of the benefit of debt waiver to the tune of Rs.8,575 crore.

114. In 2006-07, the Centre will give to the States as their share of taxes and duties Rs.120,377 crore. In 2007-08, this amount will increase to Rs.142,450 crore. Besides, total grants and loans, both under Plan and non-Plan, to States and Union Territories will increase from Rs.90,521 crore in 2006-07 to Rs.106,987 crore in 2007-08.

VAT, CST and a Roadmap towards GST

115. VAT has proved to be an unqualified success. VAT revenues of the implementing States increased by 13.8 per cent in 2005-06 and by 24.3 per cent in the first nine months of 2006-07. The next logical step is to phase out Central Sales Tax (CST). I am glad to report that the Central Government has reached an agreement with State Governments to phase out CST. Consequently, the CST rate will be reduced from 4 per cent to 3 per cent with effect from April 1, 2007. I have provided Rs.5,495 crore for compensation for losses, if any, on account of VAT and also on account of CST.

116. I wish to record my deep appreciation of the spirit of cooperative federalism displayed by State Governments and especially their Finance Ministers. At my request, the Empowered Committee of State Finance Ministers has agreed to work with the Central Government to prepare a roadmap for introducing a national level Goods and Services Tax (GST) with effect from April 1, 2010.

117. So far as the Central Government is concerned, the fiscal consolidation is proceeding according to the FRBM Act. Based on Revised Estimates, I am happy to report that the revenue deficit for the current year will be 2.0 per cent (against a BE of 2.1 per cent) and the fiscal deficit will be 3.7 per cent (against a BE of 3.8 per cent).

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