AAP government plans to include more items, hike VAT

After its failure to meet even the scaled down target of Rs 21,000 crore through value added tax (VAT), the AAP government is reportedly planning to bring several commodities under its tax regime. The government is also planning to increase VAT on several other items.

A highly-placed source said that the government might put five per cent VAT on plastic waste, textile and fabrics, readymade garments costing above Rs 2,000, wheat and rice flour and on distribution of motion pictures. There are indications that the government might increase VAT on UPS from 5 to 12.5 per cent and 20 to 25 per cent hike on liquor and tobacco products.

A senior official said that the VAT department had moved the proposal of bringing certain commodities under the ambit of VAT and also increase the tax on other products way back in February. The department had proposed increase in VAT after it failed to meet even the scaled down target. Earlier, the government had set the target of Rs 24,000 crore through VAT collections.

The administration had been able to collect about Rs 18,000 crore through VAT in the last fiscal. But the VAT department has been able to collect only Rs 19,000 crore so far. “In order to increase our collections, the department had proposed to bring certain items under VAT and also recommended tax hike on other products to generate an additional revenue of about Rs 50 crore,” an officer of the trade and taxes department told this newspaper.

The officer, however, said that deputy chief minister Manish Sisodia has rejected the VAT department’s proposal. He is said to have told the officials to review the proposal and make it part of the Budget speech for 2016-17 fiscal. The deputy CM was of the strong view that any changes in the tax regime should be effected only through the Budget proposal.

A senior AAP functionary said that any changes in tax regime before the Budget presentation could have sent a wrong message to the people of the national capital. “It is better to introduce new taxes only through the Budget document duly passed by the state legislature.”

In the last Budget, the government had not increased the VAT but had increased the luxury and entertainment tax which had hit gyms, clubs, spas and restaurant in the city. Due to hike in taxes, watching movies in multiplexes had become dearer. A monthly entertainment tax of Rs 40 was also levied on cable TV/DTH services.