After its failure to meet even the revised Rs21,000-crore target through Value Added Taxes in the current fiscal year, the Arvind Kejriwal Government is reportedly planning to bring several commodities under the tax regime. The Government is also planning to increase VAT on several other items. The proposal is expected to be a part of the Budget proposals to be presented by the AAP Government on March 28 in the Delhi Assembly.
Top sources told The Pioneer that the VAT department had moved a proposal of bringing certain commodities under the ambit of VAT and also increase the tax on other products way back in February. There are indications that the Government might increase VAT on UPS from 5 to 12.5 per cent and 20 to 25 per cent hike on liquor and tobacco products. But the proposal is expected to be the part of the main annual budget 2016-17 of the Government. The VAT has proposed VAT up to five per cent on plastic waste, textile and fabrics, readymade garments costing above Rs2,000. The department had proposed increase of VAT after it failed to meet even the revised tax target.
“In order to increase our collections, the department had proposed to bring certain items under VAT and also recommended tax hike on other products to generate an additional revenue of about Rs40-50 crore,” an officer of the VAT department on the condition of anonymity.
The officer, however, said that VAT department was of the view that hike should be made with immediate effect to increase the revenue collections. But Deputy Chief Minister Manish Sisodia, who is also holding the Finance Department portfolio, was not convinced with the VAT department and directed to make it part of the budget speech for 2016-17 year. The Budget is to be tabled on March 28. The Deputy CM was of the strong view that any changes in the tax regime should be effected only through the Budget proposal.
A senior AAP leader said that any changes in tax regime before the Budget presentation could have sent a wrong message to the people of the national Capital. “It is better to introduce new taxes only through the Budget document duly passed by the State legislature.”
Earlier, the Government had set the target of Rs24,000 crore through VAT collections. later, the administration had revised its target to only Rs21,000 crore. The VAT department could collect about Rs18 000 crore through VAT in the last fiscal year till date. But the VAT department has collected only Rs19,000 crore so far. The growth rate of VAT collection is only 11.11 per cent. It would be pertinent to mention that the growth rate of VAT collection in April in the current fiscal year was registered 55.78 per cent while the same decreased to 25.24 percent in May. Interestingly, in the month of June, it had registered - (minus) 6.89 per cent. In January, the growth rate was 20.20 per cent.
In the last Budget, the Government had not increased the VAT but had increased the luxury and entertainment tax which had hit gyms, clubs, spas and restaurant in the city. Due to hike in taxes, watching movies in multiplexes had become dearer. A monthly entertainment tax of Rs40 was also levied on cable TV/DTH services.