Odisha hikes VAT, tax on foreign liquor

The Odisha cabinet on Thursday decided to enhance Value Added Tax (VAT) on goods from 13.5 percent to 14.5 percent, expecting to generate an additional revenue of Rs.280 crore per annum.

The government aims to generate additional revenue of Rs.70 crore in this financial year.

The Odisha cabinet also approved a proposal of the excise department to levy 10 percent surcharge on foreign liquor that would help generate additional revenue of about Rs.140 crore per annum.

From 25 percent, the tax would now be 35 percent on foreign liquor whether made in India or not, including brandy, whisky, vodka, gin, rum, liquor, cordials, bitters and wines or a mixture containing any of these, as also beer.

"The cabinet took a decision for rationalisation of rates of tax under the Odisha VAT Act, 2004. VAT rate for the goods in part-III of Schedule-B has been enhanced from 13.5 percent to 14.5 percent," said state chief secretary Aditya Prasad Padhi.

The increased VAT will be imposed on plant machinery, equipment, commercial vehicles, buses, trucks, four-wheelers, two-wheelers, refrigerators, air conditioners, televisions, cement, soaps, detergents, creams and lubricants.

The government took the decision expecting that the Goods and Services Tax (GST) is likely to be introduced in the country very shortly.

The proposed GST rate is about 15-16 percent for these goods. Keeping this in view, the central government increased the rate of service tax from 12.36 percent to 14.5 percent in the Finance Act 2015-16, the chief secretary said, adding that some states have already increased tax on goods up to 15 percent.

The cabinet also authorised the finance department to enhance VAT on petrol and diesel as and when necessary with the approval of the chief minister.

"Since prices of petrol and diesel are changing fortnightly, the state is losing revenue. There is a loss of about Rs.417 crore per annum due to fall in prices. Now, the finance department will take a call on increasing and decreasing tax on the two petroleum products," said Padhi.