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15% rise in collectionof VAT for Oct-Nov
December, 06th 2016

Demonetisation may have sent the traders — who have been claiming that sales have taken a nosedive — into a tizzy, but the Value Added Tax department is not complaining as of now about its collections. Though the real impact of demonetisation on tax collections will start emerging only after an assessment of the tax collected for November, December and January, the tax collection for November at least stands at a robust Rs 2024 crore. This is almost 15% more than last year. This can be attributed to many factors, including the tax collected around Diwali.

The demonetisation drive was launched on November 9. The markets soon after began looking deserted with buyers disappearing and traders struggling to sell their products, get cash payments and return change. The fear of raids by the IT department saw traders shut shops and the cash crunch added to their woes. Amidst all this, there was a growing concern in the government that demonetisation will impact VAT collections. That fear has proved to be unfounded so far.

The corresponding collection last year in November was Rs 1751 crore. As against the 15% hike over last November, the average increase on a monthly basis ranges between 8% and 10%. The increase shows that more tax was paid in the tax cycle of October 21 to November 21. Since Diwali was on October 30, the pre-Diwali sales are reflected in the November tax cycle. Also, since most traders deposit VAT in the last few days of the monthly tax cycle, clearly VAT was paid by most traders after demonetisation had kicked in. However, sources said that the VAT department would not link the increase to demonetisation till the data is assessed.

The actual picture will start emerging from December. With Christmas and New Year celebrations yet again causing a peak in sales, January's tax cycle will firmly reflect the impact on VAT collections.

The assessments will be significant as the Delhi government will be left with just the last quarter of the current financial year to meet its target of about Rs 24,000 crore from VAT. Between April 1 and November, the state has collected VAT of about Rs 14,000 crore. For the same period last year, the figure was about Rs 12,800 crore. The Delhi government was able to earn revenue of Rs 20,500 crore from VAT at the end of financial year 2015-16.

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