With the over Rs 1-lakh-crore debt burden and the need to implement a number of welfare schemes running into thousands of crores of rupees, the AIADMK government on Monday decided to make both ends meet by revising the tax structure for most commodities, to bring an additional revenue of Rs 4,200 crore.
The State government has revised the tax structure just three weeks ahead of the presentation of a revised budget for the current fiscal year.
Expect a steep hike in the price of tobacco products and electronic goods soon, what with the tax on the two going up from 12.5 per cent to 20 per cent and from four per cent to 14.5 per cent, respectively.
Besides, the four per cent tax on 150 commodities has been increased by a per cent. The revised rate is also applicable on declared goods.
Tobacco and its products, construed as negative goods, will be taken out of the 12.5 per cent value added tax (VAT) slab, and included in Schedule II as non-VAT commodities.
Chewing tobacco, snuff and cheroot, which were exempted earlier, would now be brought under the 20 per cent tax net, finance secretary K Shanmugam said in a late night statement here.
Beedi, also exempted earlier, will be taxed at 14.5 per cent under the VAT.
The four per cent tax on LCD/LED panels, DVD/CDs, mobile phones, iPod, iPhone, and parts thereof, has been raised to 14.5 per cent.
Besides, the registration fee agreements relating to the deposit of title/lease deed and the instrument of power of attorney to sell immovable property have also been revised upwards and is expected generate an extra revenue of Rs 300 a year.
But, farm implements, falling under No. 2, Part B of Schedule I of the VAT and taxed at four per cent, will be fully exempt by their inclusion in Schedule IV. Ditto the case with fertilisers and insecticides, falling under 17 A of Schedule I and taxed currently at four per cent.
The VAT on commodities charged at 12. 5 per cent has been increased to 14.5 per cent to generate additional resources. Textile and textile products, earlier exempt, have been brought under a five per cent tax slab. But, hank yarn and handloom fabrics continue to enjoy exemption.
As there is rampant tax avoidance under edible oil, misusing of the provision of turnover-based exemption, the government decided to reduce the exemption of the turnover limit from Rs 500 crore to Rs 5 crore, so that the bigger dealers will be brought under the tax net.
The tax revisions will come into effect on Tuesday.