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VAT on all electrical goods may be raised to 14.5%
July, 23rd 2013

A number of commodities, including the packaged meat and electrical goods, may cost more as the state government is preparing to increase VAT on them. It, however, continues to be in a dilemma over taxing cloth—a commodity seen as politically sensitive.

Asked by the government, the commercial tax department has proposed to increase VAT on around half a dozen goods, including processed meat, mosquito coils and some electrical items like switches.

“We have sent the proposal to the government and now it is for them to take a call on it,” sources told Hindustan Times.

As per the proposal sent to principal secretary, commercial tax, value added tax (VAT) on processed and packed meat is proposed to be raised from the existing 5 % to 7 %.

Similarly, VAT on mosquito coils, which attracts at present only 5 % VAT, has been proposed to be as high as 12.50%.

Likewise, all electrical goods that are at present taxed at the rate of 5 % are now proposed to be brought on the list of electrical goods with 14.50 % VAT.

“There are many electrical goods like switches and wires on which VAT is only 5 % unlike all other electrical goods that are taxed at the rate of 14.50%.

Now, we have proposed 14.50 % tax on all such goods,” disclosed sources.

The department expects to net around R80- 100 crore additional revenue a year if the government clears its proposal, which comes in the wake of the government asking the commercial tax department to identify commodities on which VAT could be raised or rationalized to generate more funds.

Sources said the government was also looking for means to make up for the revenue loss that the ban on the sale of gutkha was causing to the exchequer.

Gutkha that was banned in the state from April this year in compliance of the high court order had fetched R400 crore tax to the coffer in 2012-13.

“Though the sale of pan masala and tobacco has increased since the gutkha was banned, it couldn’t offset the loss due to the ban.

Hence the government is looking for additional sources of revenue generation in the commercial tax department,” sources said,

On the other hand, the government continues to be in a fix over the commercial tax department’s long-pending proposal for taxing cloth which at present is outside the VAT’s regime and also over introducing entry tax on sugar in lieu of VAT.

“Though doing so will bring an additional revenue of several hundred crores, the government is not able to accept the proposal since both the commodities are politically sensitive,” explained sources,

“This is perhaps the reason why no other state has been able to tax cloth either despite the Centre allowing the states to impose VAT on it long ago,” sources said and added that the UP government might take a decision on these two commodities only after the Lok Sabha polls.

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