VAT impact going to be costly

BHUBANESWAR: Prices of several essential commodities and food items will go up from April 1 as the value-added tax (VAT) on these items has been increased from 4 per cent to 5 per cent. Beside

Published: 25th February 2012 03:47 AM  |   Last Updated: 16th May 2012 06:02 PM   |  A+A-

BHUBANESWAR: Prices of several essential commodities and food items will go up from April 1 as the value-added tax (VAT) on these items has been increased from 4 per cent to 5 per cent. Besides, VAT of 5 per cent will also be imposed on sugar and textile fabric.

 As a balancing act, the State Government announced revision of pension for 37 lakh old, widow and differently-abled persons from `200 to `300 per month, to be implemented from the same date.

 Finance Minister Prafulla Chandra Ghadei announced the tax measures while presenting the budget for 2012-13 in the Assembly on Friday. Explaining the reason behind the increase in VAT rate, the minister said  there was a consensus at the empowered committee of State finance ministers on  this and it was also linked to grant of Central sales tax (CST) compensation by the Centre.

 The Centre has also raised the rate of tax for declared goods from 4 per cent to 5 per cent. In fact, most of the States had gone for increase of tax rate much earlier, Ghadei said, adding that the State had to lose CST compensation of around Rs 260 crore in 2010-11 for non-revision of the rate.

 The minister, however, clarified that the revision may not affect the prices of essential commodities as most of the packaged commodities and medicines are being sold on MRP. Similarly, as industrial inputs are eligible for input tax credit, it will also not affect the prices of final product, he said.

 Ghadei said after sugar and textile fabrics were removed from the schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957, these goods became liable for VAT from April 8, 2011. But levy of tax was put on hold till a national consensus was reached on the matter because of protests from the traders of the State.  Paddy, rice, wheat, pulses, flour, atta, maida, suji, besan, fried grams, gur, jaggery, arcanut powder, betel nut, bamboo, beedi leaves, bicycles, tricycles, cycle rickshaws and parts, bitumen, bone meal, branded bread, bulk drugs, capital goods, castings, centrifugal, monobloc and submersible pumps and parts, chemical fertilisers, pesticides, weedicides and insecticides, coffee beans and seeds, cocoa pod, green tea leaf and chicory, coir and coir products, cotton and cotton waste, crucibles, drugs and medicines, edible oils, oil cake and de-oiled cake, electrodes, exercise book, graph and laboratory note book, kerosene oil sold through PDS, incense sticks, ores and minerals, plastic footwear, sewing machines, seeds, aluminium utensils and enamelled utensils are some of the 79  goods which will be costlier after the tax revision.

 The Finance Minister announced that additional resources to be realised on this account will be fully utilised for payment of pension at the enhanced rate. While the tax measures will yield an additional Rs 400 crore per year, the pension will cost Rs 440 crore, Ghadei said.

 The budget has been estimated at Rs 52,755.15 crore, including Rs 35,070.8 crore provision in the non-plan account, Rs 15,204.14 crore State plan, Rs 829.78 crore for central plan and Rs 1,650.43 crore for Centrally-sponsored plan.

 The revenue receipts and revenue expenditure have been estimated at Rs 43,842.74 crore and Rs 41,431.97 crore with a revenue surplus of Rs 2,410.77 crore. But the fiscal deficit will be Rs 4,751.75 crore. The State’s dependence on borrowing has also been reduced with borrowing estimated at Rs 3,260.54 crore in 2012-13.

 While the State own tax revenue has been targeted at Rs 15,610.28 crore, non-tax revenue will be Rs 5,200 crore. The share in central taxes will be Rs 13,481 crore while grants-in-aid from the Centre has been anticipated at Rs 9,551.46 crore. The non-plan expenditure is estimated at Rs 34,350.49 crore with an increase of 14.65 per cent over the revised estimates for 2011-12.

 The minister said that capital investment has been stepped up by 25 per cent to reach Rs 7,042 crore. With this increased allocation, it is estimated that the capital expenditure will go up to nearly 3 per cent of the GSDP.

 Ghadei said priority has been given to agriculture, infrastructure and development sectors. Most of the schemes launched by the State Government will continue. The allocation for rice at Rs 2 per kg scheme has been increased to Rs 1,140.57 crore.

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