In a significant restructuring of Value Added Tax (VAT) rates, the Orissa government on Wednesday announced a hike in tax rate on tobacco products from the existing 13.5 per cent to 25 per cent, a move that is set to enrich the state exchequer by Rs 50 crore per annum.
Besides, unmanufactured tobacco, biri and tobacco used in manufacture of biri which were earlier exempted from VAT will come under tax net as the state has decided to levy 10 per cent tax on such items. The move to raise VAT on tobacco products has been necessitated by similar tax hikes already introduced by neighbouring states and also factoring in increasing health risk posed by tobacco consumption. This enhanced tax rate will be applicable with immediate effect and a notification will be issued on Thursday by the state government, state minister for finance and public enterprises, Prafulla Chandra Ghadai told newspersons here.
Apart from raising VAT on tobacco products, the state finance department has also decided to lift input tax credit on coal used by thermal power plants. Following lifting of credit, the department hopes to gain Rs 50 crore per year. It has also been decided to raise VAT rate of cellular handsets costing Rs 5,000 and beyond from four per cent to 13.5 per cent.
The items on which the state finance department has decided to ease VAT rates include excavators, bulldozers, back loaders, glass sheets, plywood, laminated sheet, particle board and structural steel. These products would now be levied VAT at the rate of four per cent from 13.5 per cent. It may be noted that the Hota committee, an expert committee formed by the state government to suggest revenue enhancement measures, had recommended hike in base VAT rate in the state from four per cent to five per cent.