Sikkim : Tax and Economic Reforms
The economic liberalization in India , initiated in 1991, with principles of Liberalization , Privatization and Globalization (LPG) of the country’s economic policies, with the goal of making the economy more market and service-oriented and expanding the role of private and foreign investment. Specific changes include a reduction in import tariffs, deregulation of markets, reduction of taxes, and greater foreign investment. Liberalization has been credited by its proponents for the high economic growth recorded by the country in the 1990s and 2000s. And it has positive impact on the state of Bihar as can be visibly seen from various sectors.
India’s GDP has increased thereafter and also the GSDP of state has increased many folds. Between 2004-05 and 2015-16, Gross State Domestic Product (GSDP) of Sikkim has expanded at a compound annual growth rate (CAGR) of 19.44 per cent to US$ 2.75 billion whereas the Net State Domestic Product (NSDP) expanded at a CAGR of 19.11 per cent to US$ 2.33 billion.
Agricultural Sector
The state’s economy is largely agrarian, based on the terraced farming of rice and the cultivation of crops such as maize, millet, wheat, barley, oranges, tea and cardamom. Sikkim produces more cardamom than any other Indian state, and is home to the largest cultivated area of cardamom
Sikkim has a suitable climate for agricultural and horticultural products. It supports multiple crops; viz., rice, wheat, maize, millet, barley, urad, pea, soya bean, mustard and large cardamom. Sikkim is the top producer of large cardamom, contributing over 80 per cent to India’s total production.
As per the state budget 2016-17, Sikkim got certified as first fully organic state in India by the Central Ministry of Agriculture and Farmers’ Welfare as well as other recognized agencies of the country.
Organic Farming
Sikkim has been transformed as the first Organic State of the country and the world by design and have opened unlimited opportunities in sectors like Agriculture, Horticulture and Animal Husbandry.
Industrial Sector
Industries plays an important part to the development of the state. State government has taken various measures to provide impetus to the growth of the economy.
There has been a drastic shift in the sectoral contribution from primary and tertiary to the secondary sector. The overall performance of the economy of the state during 2015-16 was encouraging. At a CAGR of 33.91%, the secondary sector witnessed the fastest growth among the three sectors during 2004-05 to 2015-16. It was driven by manufacturing, construction and electricity, gas & water supply. In 2015-16, the secondary sector contributed 67.73% to the state’s GSDP at current prices.
The state follows the North East Industrial Investment Promotion Policy, 2007, which provides several incentives and concessions for investment. Institutional support is provided through various central and state government agencies viz., North East Council, Ministry of Development of North Eastern Region and Commerce and Industries Department.
The main industries like Brewing, distilling, tanning and watchmaking are located in the southern regions of Sikkim.
Tertiary sector
State government has implemented various policies to increase the growth rate of Tertiary sector. Various policies like IT Policy , Tourism Policy gives impetus for the growth of the services sector and hence development of economy. Industrial sector contributes majorly to the development, followed by the tertiary sector at 23.65% and primary sector at 8.62%. The tertiary sector grew at a CAGR of 15.23% between 2004-05 and 2015-16. The growth has been driven by trade, hotels, real estate, finance, insurance, transport, communications and other services. The primary sector grew at a CAGR of 15.55% between 2004-05 and 2015-16.
Tourism provides the main thrust to the economy. With the tranquil climate, the natural beauty and the fine cultural heritage of Sikkim, the growth of tourism has immense possibilities. There are large number of places of tourist attraction particularly the snow clad mountains, the lakes and unspoiled forest areas and valleys of flowers. The advantage of having very fine monasteries in Sikkim can also be taken to attract Buddhist tourists from countries like Japan and the South Eastern countries.
Total Receipts and Total Expenditure
For the fiscal year 2017-18, a gross expenditure of Rs. 6364.02 crores has been projected in the budget.
After taking into account recoveries amounting to Rs. 142.20 crores, the net expenditure comes to Rs. 6221.82 crores.
The fiscal deficit remains in adherence to the fiscal management targets set in the Sikkim Fiscal Responsibility and Budget Management Act, 2010, i.e. not more than 3% of GSDP. The contribution from total tax revenue is of the order of Rs. 669.51 crores and in the case of Non-Tax revenue, Rs. 426.46 crores.
The total gross expenditure includes allocations amounting to Rs. 81.76 crores under the dispensation of the North Eastern Council, Rs. 153.66 crores under Non Lapsable Pool of Central Resources, and Rs. 1326.76 crores under Centrally Sponsored Schemes.
In Union budget, the distinction between Plan and Non-Plan has been done away with from the year 2017-18 onwards. This has been done as a measure towards bringing about major fiscal and budgetary reforms while retaining the distinction on the basis of Revenue and Capital expenditures. Since the Union and the States have to work together on the methodology, State has also adopted the same system from the financial year 2017-18 budget.
Tax proposals
Accordingly, the main taxes of the State Government like the Value Added Tax, Central Sales Tax, Entry Tax, Cess and Luxury Tax etc. and also the taxes of the Government of India like the Central Excise and Services Tax, have now been subsumed in the Goods and Services Tax.
Goods and Service Tax (GST)
GST, will replace multiple state and central taxes to create one national market and single tax in the country. This bill seeks to subsume all central indirect levies like excise duty, countervailing duty and service tax and also state taxes such as value added tax, entry tax and luxury tax, to create a single, pan-India market.
GST will be a game changer in the states as they eradicate the cascading effect on goods and services.GST will bring down the cost of goods and services as there will be no cascading effects of taxes. He added that GST is expected to increase revenue by widening the tax base and improving the taxpayer compliance. 7% items are such on which no taxes would be levied, 14% items would be in the lowest bracket of 5% tax, 17% items will have 12% tax, 43% items will have 18% tax, and 19% items, which are generally not used by people will have 28% tax.
Only the Goods and Services Tax will be levied in place of all these taxes in the indirect tax regime. Petroleum products and liquor have been kept out of the GST, as of now. The rates of the tax will be uniform on goods and services in the entire nation. As per the decision taken by the GST Council, the Goods and Services Tax will be implemented from 1st July, 2017 onwards.
The State Government has made all necessary preparations for the implementation of the new tax regime so that the trade and industry of the State do not face any difficulties. E-payment will be made compulsory for the payment of taxes.
