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Sharp increase in value added tax on the raw materials
January, 11th 2011

Although the state government has been largely unsuccessful in enforcing the ban on plastic bags, a sharp increase in value added tax (VAT) on the raw materials for these bags may eventually discourage their use by pushing up prices.

The states excise and taxation department in its notification of January 7 increased VAT on plastic granules, plastic powder and master batches all used for making the bags from 5 per cent to 8.8 per cent (including the surcharge).

On many other items, the tax has been increased up to 12.5 per cent. On such items, tax should have been increased even more as well. But the department seems to be very liberal and hence is still favouring the manufacturing of plastic bags which are a pollution hazard, said Mohinder Aggarwal, General Secretary of Punjab Pradesh Beopar Mandal.

However, on multimedia speakers and headphones, the VAT has been increased from 4 per cent to 12.5 per cent.

These are luxury items and hence consumers will not mind paying a little more as well, say tax officials.

Power cuts are a part of the life in Punjab in all seasons, but excise officials seem to have little sympathy for the common man. They have quietly increased VAT on UPSes and invertors from the existing 4 per cent to 8.8 per cent. These items will hence cost more in the coming days. The Beopar Mandal team, however, said that a lot of tax revenue was being lost in this segment, as UPSes did not come under any tax slab while invertors were also being sold as UPSes.

Theres good news for makers of sunglasses, contact lenses, lens cleaners, spectacles, as VAT on these items has been reduced from 12.5 per cent to 8.8 per cent.VAT on pulses has finally been reduced from 4 per cent to 1 per cent and even besan has also been included in the 1per cent tax structure. Besan was exempted from the tax net earlier and shopkeepers were selling even pulses under the head of besan to evade tax.

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