State to mop up additional Rs 200 crore from VAT hike

Waiver of entry tax to cause revenue loss of Rs 20 crore

The Orissa government expects to mop up an additional Rs 150-200 crore through one per cent hike in Value Added Tax (VAT) from 12.5 per cent to 13.5 per cent. The hike in VAT rate would be effective from April 1 this year.

Under the VAT regime, the essential commodities are being taxed at four per cent while 12.5 per cent is levied on consumer durables. This was as per the national consensus arrived at the level of the Empowered Committee of the state finance ministers.

Justifying the need to hike VAT rate on consumer durables, Prafulla Chandra Ghadai, the state finance minister said, “Recently, there has been a recommendation of the state finance ministers to raise the tax rate from 4 to 5 per cent and most of the states have already implemented it. WE have refrained from doing so keeping in view the abnormal rise in prices of the essential commodities in the market in the recent months. Therefore, the only alternative left for us is to raise the tax for consumer durable articles from 12.5 per cent to 13.5 per cent at par with the tax rate of such commodities introduced much earlier in our neighbouring states like Chhattisgarh and Andhra Pradesh.”

“States like Assam, Jammu & Kashmir, Uttar Pradesh and West Bengal have increased the rate to 13.5 per cent while other states like Chhattisgarh, Gujarat and Rajasthan have increased the same to 14 per cent. The rate has been raised to 14.5 per cent in Andhra Pradesh. Thus, it has been decided to levy VAT in the state from April 1 this year. Although this will result in levy of higher tax on items like cars, refrigerators and air conditioners but the common man will not be affected by this. On the other hand, it will help in augmentation of revenue of the state”, the minister stated in his Budget speech.