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Govt surprises with VAT hike before budget, most items become costlier
February, 04th 2016

In a late night move on Monday that took people by surprise, the state government has increased taxes almost across the board making most of the household items and industrial inputs costlier by at least 0.5%.
Whether you are taking your beloved one to candle light dinner in a heritage or buying computer system for your kid, you need to shell out more even today as the decision has been notified.

Even the poor cannot escape the axe as flour prices, among about 2,000 items, have become dearer from Tuesday itself. "This is certainly not going to bring acche din. Instead of providing relief, the government is actually making the life of the common man difficult. How can a chief minister, who talks about lakhs of crore rupees of investment coming to the state, take such a decision suddenly," said Suresh Kumawat, a primary school teacher.

Bedsheets, pillow covers, imitation jewellery, candles, tyres, computer systems and accessories, tent, microphones, multimedia speakers, head & ear phones, drugs and medicines, branded confectionery items, LCD & LED panels, switches, connectors, buckets, handicrafts and many more such items will have an impact on the household budgets. Even the farmers who are suffering from severe erratic whether conditions with heavy damage to their crops are excluded from the new tax burdens as bio-fertilizers, micronutrients, plant growth promoters and regulators, herbicides, rodenticide, and insecticide will be costlier.

The increased value-added tax (VAT) from 5% to 5.5% covers items under three segments. While schedule-4 goods are in general in nature, IT products in schedule IV and industrial inputs (part-B of schedule IV are other categories that have been brought under the new tax regime.

While the state government, which appears to be struggling to meet its revenue collection targets, may have preferred a small increase of 0.5% even though on a vast range of items, the blow was conspicuous on the direct-to-home (DTH) services.

On Tuesday, the government raised VAT on DTH broadcasting service or a cable service with addressable system from 10% to 15% which is effective from Wednesday. Nesar Ahmad, coordinator, Budget Analysis, Rajasthan Centre, said besides the dramatic fall in oil revenues, the slow pace of economic growth has taken toll on the government's finances necessitating such a measure.

"The government might have sensed that it would be difficult to meet the revenue targets announced in the budget and the hike could provide some cushion to carry out necessary government expenses," said Ahmad.
For industry, it was no different. Industrial inputs under 283 sub-segments will now attract 5.5% VAT instead of 5%. The items include industrial oil, chemicals, PVC, plastic goods, glass items, and many more.

"Industry doesn't mind giving some 0.5% extra tax but we expect the government to spend the money prudently, eliminating leakages and sub-standard work. We don't need to re-lay a road twice in a year if the quality of the material is good," said Sanjay Ghiya, a chartered accountant.

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