Odisha hikes VAT rate to 14.5%, to gain Rs 280 cr revenue

The enhanced VAT rate would be applicable on goods like plant machinery, equipment, commercial vehicles, air conditioners, refrigerators, two-wheelers etc

The Odisha State Cabinet today approved a proposal to hike the VAT rate to 14.5 per cent from 13.5 per cent presently, on unspecified goods. The tax rate hike will enrich the state exchequer by Rs 280 crore per annum and also means a revenue gain of Rs 70 crore for the remainder of this fiscal.

"The VAT rate is being revised after a gap of four years and nine months. Most of the states were charging a VAT rate higher than us. Besides, the Government of India has already hiked the service tax rate from 12.36 per cent to 14.5 per cent", R Balakrishnan, development commissioner and additional chief secretary (finance) said after the Cabinet meeting.

States like Andhra Pradesh, Telengana, Karnataka, Rajasthan, Tamil Nadu, Kerala, Punjab and West Bengal are already charging VAT of 14.5 per cent on unspecified goods. In Madhya Pradesh, Jharkhand and Chhattisgarh, the VAT rate is 14 per cent whereas Gujarat levies 14.5 per cent VAT rate on unspecified goods.

The enhanced VAT rate would be applicable on goods like plant machinery, equipment, commercial vehicles, air conditioners, refrigerators, two-wheelers, four-wheelers, television, soap, detergents, cement and lubricants.

The state government also stepped up the VAT rate on foreign liquor from 25 per cent to 35 per cent. The move would spell a revenue gain of Rs 140 crore per annum. The revised rate would apply to the entire gamut of foreign liquor including Indian Made Foreign Liquor.

Separately, in the light of fluctuating prices of petrol and diesel, the state government decided to authorise the finance department to make suitable changes in VAT rates on these two petroleum products after obtaining necessary orders of the chief minister.

"Due to falling prices of petrol and diesel, the state government is losing revenue of Rs 417 crore every year. On the other hand, the central government has been raising excise duty on petrol and diesel. Hence, the Cabinet has authorised the finance department to recoup loss of revenue due to decrease in prices of petrol and diesel", Balakrishnan said.

At present, the VAT rate of petrol and diesel stands at 23 per cent. The VAT rate on the two products was last revised in December 2014.