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Punjab defies crisis, registers 39% rise in VAT collections
November, 20th 2008

Ongoing slowdown may not have any adverse impact on the collection of Value Added Tax (VAT) in Punjab in view of states agrarian economy. Punjab has recorded a 38.9% increase in VAT collections in the first six months of 2008-09, positioning itself at third spot in the country.

Sources in Punjab chief ministers office told FE here on Wednesday, VAT collection in Punjab may further go up if Centre hikes the minimum support price (MSP) of food grains. Punjab has scored record amount of wheat crop this year and highest ever paddy procurement in the current procurement season.

As far as growth under VAT is concerned, a remarkable jump from twenty fourth position in 2006. Sources said the term slowdown or meltdown was wrong as it has almost no effect on Punjab.

Sukhbir Singh Badal, MP from Punjab and president of Shiromani Akali Dal said the major factors that had led to buoyancy in VAT collections were rationalisation of tax structure or restructuring of tariffs, stoppage of pilferage and effective tax realisation registration of more than 15,000 new traders under VAT during the current fiscal, besides improvement in VAT billing and sustained efforts in ensuring compliance did the trick.

In the first six months of 2008-09, VAT collection had gone up to Rs 3,330.82 crore -- Rs 933.65 crore more than the collections during the same period last year. The VAT collection in 2006-07 was Rs 4778.69 crore, of which, agriculture alone accounted for Rs 592 crore. During the current fiscal, the contribution of agriculture to Punjabs gross revenue would be about Rs 4,300 crore, the largest contribution by a single sector to the states gross revenue. The current paddy season also marks Rs 600 crore contributions to VAT collections.

By the end of November, paddy worth Rs 15,000 crore will be sold in grain markets in the state, on which 4% VAT would be collected by the state government. Badal observed that more than 50% of VAT in Punjab comes from agriculture which is booming now.

Badal, however, lamented that the concept of VAT was introduced to bring uniformity in tax regime but the idea had been defeated with different VAT rates in different states.

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