Mani tweaks rates to raise Rs.1,152 crore

Revenue Minister K.M. Mani has proposed changes in the Value Added Tax (VAT) rates, road tax on motor vehicles, social security cess on Indian Made Foreign Liquor (IMFL), and the tax on various tobacco products to mop up additional revenue totalling Rs.1,152 crore during the coming financial year.

Presenting his additional resource mobilisation measures for the coming year in his budget , Mr. Mani said the general VAT rates would be raised from the existing 4 per cent to 5 per cent and from 12.5 per cent to 13.5 per cent.

The Finance Minister reduced the VAT on various cereals, grams, and flour from the existing 4 per cent to 1 per cent, aligning the rates with that applicable to various other essential commodities.

In addition, he also waived the 1 per cent cess on VAT and said that taken together, these rate changes would help mobilise Rs.1,000 crore in additional revenue.

Mr. Mani explained that the VAT rate changes were long overdue. There was consensus on the rate change at a meeting of State Finance Ministers.

Following this, the Centre had raised the rates on declared goods from 4 per cent to 5 per cent and the 1 per cent increase was effected by most States, particularly those in southern India.

A danger implicit in not changing the rates was that of the State getting only a lesser amount as compensation at the time of implementation of the Goods and Services Tax (GST). The Finance Minister sought to raise Rs.115 crore in additional revenue by revising the road tax on motor cars and other vehicles purchased for private use.

Under the new scheme of things, the road tax would be determined by the price of the vehicle as is the case in the neighbouring States. Thus vehicles having purchase price up to Rs.5 lakh would attract 6 per cent tax, those priced between Rs.5 lakh and Rs.10 lakh would carry a tax of 8 per cent, those priced between Rs.10 lakh and Rs.15 lakh a tax of 10 per cent, and those priced above Rs.15 lakh would attract 15 per cent tax.

Mr. Mani proposed hike in the tax on cigarette and other tobacco products, excluding beedi, from 12.5 per cent to 15 per cent and that on tobacco products such as pan masala from 12.5 per cent to 20 per cent to raise Rs.76 crore and the social security cess on the tax on IMFL from 6 per cent to 10 per cent to raise Rs.90 crore.

He also raised the tax on plastic bags from 12.5 per cent to 20 per cent and announced that changes would be effected in the compounded tax on drugs to align them with the scheduled rates.

He also announced that the existing land tax rates would be doubled and that changes would be effected in the stamp duty rates.