Industrialists in Punjab rue VAT hike     

With the Punjab government having decided to raise value added tax (VAT) from 4 to 5 per cent with effect from today, industrialists in the state alleged the industry would bear the brunt of the hike, ultimately affecting consumers on account of government’s poor fiscal management.

The increase in rates would affect hand tools, agricultural implements, packing materials, bicycles and capital goods industries. Speaking to Business Standard, one of the industrialists said, “The 25 per cent hike in VAT rate from 4 to 5 per cent will make products dearer. Already industry in the state is suffering on account of tax incentives given to the neighbouring states like Himachal Pradesh and Jammu & Kashmir. Even the state government has put up their case to the Centre that industries in the state had suffered due to tax incentives to the hilly states and further advocated to the Centre that the tax holiday to the hilly state should not be extended to March 2013, which is going to expire on March 2010.”

“Despite knowing all this, the state government has raised the rates. By increasing the rates the state government is simply discouraging industrial operations here. Already the slowdown has cast its shadow over industries and the hike will further deteriorate industrialisation in the state as it would make the output costly in domestic market as well exports market,” he added.

They apprehend that the resultant increase in prices will make industrial goods costlier and push down consumer demand. Traders also alleged that if the government did not withdraw the hike, they would be forced to do agitation across the state.

Industrialists in the state rued that there was no need to increase the rates as the state registered double digit growth in VAT collections. Punjab has registered 12 per cent increase in VAT collection during the first nine months of the current fiscal year as compared with the corresponding period previous year. Already having collected Rs 6,200 crore as on December 31, the government expects to collect Rs 8,000 crore this fiscal, which would be about 18 per cent growth.

Source: The Business Standard, India, dated 30/01/2010