State may hike taxes on liquor, retail petroleum products

Revenue has seen sluggish growth in past two quarters due to drop in mining revenue, the biggest contributor to its non-tax income

The commercial tax wing of the state finance department is considering a host of proposals such as enhancing sales taxes on liquor and retail petroleum products to boost its revenue earnings, which has seen sluggish growth in past two quarters on account of drop in mining revenue, the biggest contributor to its non-tax income.

“A proposal has been sent to enhance sales taxes on liquor by 5 to 10 per cent, taking a cue from neighbouring states. The rise in rates might bring in additional Rs 200-300 crore,” said a source in the state finance department.

Currently Odisha charges 20 per cent sales tax on liquor, whereas many other states collect it at the rate of 25 to 30 per cent. The earnings from this sector constituted 21 per cent of the total Rs 11,212 crore commercial tax collection in the state during 2012-13.

The state government is also planning to enhance taxes on retail petroleum products.

“Policy section should submit a proposal of amendment of sales price definition to enable levy of tax on retail price of petroleum oil,” read a note sheet of the commercial tax department recently.

The state levies 18 per cent sales tax on petroleum products, as per Schedule C of Odisha VAT Act, which has provision to collect taxes on selected items at single point on total sales value. The state government wants to change the definition of sale prices, so that it can collect tax both from bulk suppliers and from retail dealers. The proposal to enhance taxes on retail petroleum products comes at a time when the government has decided to cut sales tax on Aviation Turbine Fuel (ATF) from 20 per cent to 5 per cent, to attract airlines to operate from the recently upgraded Biju Patnaik International Airport. Recent data showed that  sales tax, the single biggest contributor to the state’s own tax revenue base, rose 12.91 per cent to Rs 4,493.68 crore from Rs 3,980 crore during April-September period of the current fiscal. Other taxes such as stamps & registration, state excise, sales tax, taxes on goods & passengers and taxes & duties on electricity also posted substantial growth. Total tax revenue expanded 12.07 per cent to Rs 7,057.57 crore from Rs 6,297.44 crore in the corresponding period of 2012-13.

However, in the same time, total non-tax revenue collection slid to Rs 3,238.34 crore from Rs 3,275.58 crore in the corresponding period of 2012-13. Mining revenue which contributes a whopping 75-80 per cent to the state’s non-tax revenue basket, dropped 4.64 per cent to Rs 2,582.46 crore as against Rs 2,708.15 crore in the same period of last fiscal.

Total revenue from tax and non-tax collections till September has been close to Rs 10,300 crore. For current financial year, the Odisha government has set a target of generating Rs 26,500 crore from tax and non-tax revenue.

The state government collected a total of Rs 22,924 crore revenue during 2012-13 of which tax revenue was around Rs 15,150 crore and non-tax revenue around Rs 7,792 crore.