| Tobacco will attract four per cent value added tax (VAT) in Orissa from the current fiscal. This follows the amendment to central sales tax and additional duties of excise act by the Union finance ministry.
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| Prior to this, the states and the Union government had agreed upon a compensation package in lieu of the revenue loss which the states would be subjected to, on account of reduction of central sales tax from four per cent to three per cent from April 1.
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| Subsequently, the Centre had issued a notification on March 29 on the amendment of Central Sales Tax Act 1956 and the Additional Duties of Excise (goods of special importance) Act 1957.
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| According to the taxation laws amendment act 2007, the rate of central sales tax (CST) on inter-state sale to registered dealers has been reduced to three per cent from the existing four per cent. On the other hand the rate of CST on inter-state sale other than the registered dealers will be the same as the rate of VAT or state sales tax applicable in the state of the selling dealers.
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| After this notification, the Orissa government has started levying four per cent VAT on tobacco. However, the state can impose 12.5 per cent tax (the higher slab of VAT) on tobacco once the state cabinet puts the seal of approval to it, according to sources.
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| Similarly, the facility of inter-state purchases by government departments against the form D has been withdrawn. Due to this provision, various state and central government departments were paying only four per cent tax on their purchases at a concessional rate, for which the selling state was at loss.
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| In order to remove such anomalies, this facility has been withdrawn. Hence the purchasing departments will have to pay the rate of vat/state sales tax in the state the dealer sells his good.
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| It is pertinent to note that previously additional excise duty was collected from tobacco, sugar and textile. But from 1st of April, 2007 tobacco has been taken out of the first schedule of the additional duties of excise (goods of special importance) act 1957 as well as the list of declared goods by the central government, enabling the state government to levy VAT on tobacco, sources said, adding Orissa would not lose its share out of the one per cent devolution from the divisible pool of central taxes.
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| Meanwhile the total CST collections in Orissa reached Rs 722 crore during 2006-07 recording a growth of 48.19 per cent over last year's collection of Rs 487 crore. While public sector Nalco contributed Rs 103.73 crore, Rourkela Steel Plant contributed Rs 115.31crore. |
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