Jammu & Kashmir - Riding on Vat, revenue collections rise 82%

Jammu and Kashmir, the crown of the country, whose economy has suffered for long because of militancy, has topped the charts as far as revenue collection during 2006-07 is concerned.

In a telephonic interview, state finance minister, J&K, Tariq Hameed Karra, who is also a member of the Empowered Committee of Finance Ministers on Vat, told FE recently that in 2006-07, revenue collections rose 82% over the previous year. He said the trend had begun in April 2006, when revenue rose by 66% and by November 2006, growth in tax collections had reached 79%. Overall growth at the end of 2006-07 was over 82% which, Karra claimed, was the ‘highest in the country’.

The trouble-torn state achieved another milestone as registration of traders under the value-added tax regime went up from 22,426 (pre-Vat) to 42,722, registering a growth of 94%.

Thanks to the Union ministry of tourism promoting J&K through the ‘Incredible India’ campaign, and the wooing of investment in food processing, floriculture, infotech, sericulture, handloom and handicrafts, processing of gems and precious stones, sports goods industry and green house industry in the snow-clad Ladakh zone, the state registered the highest growth in the country as far as the collection of revenue from various state taxes is concerned, Karra added.

Despite terrorism, consumer culture was flourishing in the state with people open to using all sorts of facilities to improve their standard of living, the state finance minister said. This, he said, was reflected in the growth in revenue from taxes. The other states that lead in revenue from Vat are Kerala at 55%, Himachal Pradesh 25%, Haryana 22% and Punjab at 10.3%. The all-India growth in revenue from Vat in 2006-07 was 25%.

Karra said an exercise had now begun to replace Vat with goods and services tax (GST) in the country. States had been asked by the Centre to present their views on this. He said GST was a superior system of tax collection, adopted by countries like Brazil. The Centre was keen on introducing GST by 2010-11. States had been given four models to study enforcement of GST. According to one model, the Centre should be empowered to levy all taxes, whereas under another model, both the states and the Centre would levy taxes.

Karra said the Empowered Committee had lauded J&K for effective implementation of Vat, and had asked other states follow it as a role model. He, however, said some critical issues were impeding the augmentation of state revenues. For instance, a major area of concern was the delay by the Centre in fulfilling its commitment to the states regarding losses suffered due to switch-over to Vat regime.

The second area of concern, Karra said, was tax deviation by neighbouring states on goods listed under Vat. While the national average of such deviation was only 3%, the deviations by states neighbouring J&K was 15%, Karra said. ‘‘Such deviations by the neighbouring states cause a huge revenue loss to J&K and the central government must intervene,’’ he added.