In the worst of times, when the state government sometimes has to depend on overdrafts from the Reserve Bank of India to meet its expenses, West Bengal finance minister Asim Dasgupta plans to net Rs 225 crore by raising tax on items of comfort and luxury. This is over and above the additional mobilization of Rs 125 crore from taxes and excise proposed in the state budget for the current year.

In fact, the VAT on a range of 282 items including cosmetics, motor cars, air-conditioners, cooking ranges, television sets, refrigerators and high-end mobile sets was already raised to 13.5% from the previous 12.5% by an ordinance in November. On Thursday, The West Bengal Taxation Laws (Second Amendment) Bill, 2010, was passed in the assembly to replace the ordinance.

Dasgupta claimed that the VAT was raised at a time when there had been an easing of the price situation, as reflected in a small fall in the price index released by the Centre.

He agreed, however, that the price index did not always reflect the reality of the price situation faced by retail consumers and the formula should be recast. He also pointed out that he had raised tax on luxury items, not on essentials.

The finance minister claimed that the financial situation of the state had improved, with targets of tax revenue being surpassed and more collection on stamp duty. It would improve further if the Centre released Rs 7,000 crore due from it, including Rs 4,833 crore on account of coal royalty, Rs 1,465 crore on debt relief from the 13th Finance Commission recommendations, Rs 900 crore as compensation for lowered central sales tax shares and Rs 736 crore from the National Calamity Relief Fund. Of these, the state had received Rs 240 crore on account of damage caused by cyclone Aila. Dasgupta claimed the government should get the debt relief amount, as the criteria of Fiscal Responsibility and Budget Management Act were now being met.

Dasgupta announced that the state government would shortly release pending instalments of local area development fund of MLAs. That, too, would total to Rs 240 crore.