The move is expected to generate additional revenue of Rs 3,900 crore

The State government on Monday announced the revision of Sales Tax rates, which is expected to generate additional revenue of Rs 3,900 crore per annum.

In addition, it revised the registration fees on various documents, which would generate another Rs 300 crore. The new tax rates come into effect from Tuesday.

An official release from the Principal Secretary to the Government, Finance Department said the earlier government had left a huge debt of over Rs 1 lakh crore and the State government had to mobilise additional resources to adhere to the fiscal norms and also to implement new welfare schemes successfully. Revision of Sales Tax has been identified as one of the possible sources and accordingly, the government has taken the decision and issued a notification on Monday to make certain changes in the Sales Tax rates.

Revenue deficit

Under the current fiscal norms, the government has to eliminate revenue deficit at the end of this financial year and rein in fiscal deficit at below three per cent of the Gross State Domestic Product.

In the revised structure, Value Added Tax (VAT) on commodities now charged at the rate of four per cent would go up to five per cent. This according to the Government would bring the State on a par with Karnataka, Maharashtra and Gujarat.

However, agricultural implements now taxed at four per cent would be fully exempted from VAT. Similarly, fertilisers and insecticides (presently four per cent) would also be fully exempted.

Commodities now charged at 12. 5 per cent would attract 14.5 per cent, the State government sought to justify the hike saying Andhra Pradesh has hiked its rate to 14.5 per cent and Karnataka to 13.5 per cent.

In Gujarat certain commodities are taxed at 15 per cent and some others at 20 per cent.

For edible oils, the State government has decided to reduce the exemption of the turnover limit from Rs 500 crore to Rs 5 crore.

Tax avoidance

The government said there was rampant tax avoidance under edible oils due to misuse of the turnover based exemption. The step would bring bigger dealers under the tax net.

The prices of cellular phones, i-pod, i-phones, LCD/LED panels, DVDs and CDs and the parts are set to go up, as the tax on them has been sharply raised from four to 14.5 per cent.

Tobacco and tobacco products would be taxed at 20 per cent instead of 12.5 per cent.

Beedi and beedi tobacco, earlier exempted would be now brought under VAT and taxed at 14.5 per cent.

Textiles and textile products, which were earlier exempted, will be brought under 5 per cent tax. This was exempted earlier as the Central Government was collecting Additional Excise Duty (AED).

The Government of India has already abolished AED and permitted the States to levy Sales Tax.

As cone yarn is already taxed at 5 per cent in the present dispensation, taxing textiles will get the benefit of input tax credit as a part of the VAT chain. Andhra Pradesh has also brought textiles and textile products under VAT.

Exemption continues

However, hank yarn and handloom fabrics will continue to enjoy the exemption, the release added.

Keywords: sales taxtax revisionVAT

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