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In
fact, this is the cost for the delay, as the three-year
deadline set by the Centre for compensating for the loss
under the VAT, is due to end this financial year.
However, CM Mayawati seems to have a different idea. If
sources are to be believed, she might seek yet another
special compensation package for UP or make it an issue
against the Congress-led Centre. So the VAT loss of the
state may become yet another bone of contention between
the Congress and the ruling BSP in the state.
The projected loss, according to a rough estimate, may be
well over Rs 3,000 crore this year. This means the revenue
target of Rs 28,437.56 crore set for this financial year,
seems to be a distant goal to be achieved. The paucity of
resources, would thus adversely affect the sustainability
of the annual plan, which has been pegged at an all time
high at Rs 25,000 crore this year.
However, the VAT regime may come as a mixed bag. While the
government pins hope on 33 services proposed to be
incorporated for taxation at the rate of 12 per cent for
the first time, consumers hope to save money on eatables,
including cooked meals, at their favourite joints and
restaurants.
This is possible as 12.5% trade tax imposed on the cooked
food at present in the state, might have to be slashed
under the VAT regime.
Fruit juices, which are taxed 16% at present and items
manufactured in the state, are also likely to be cheaper.
Similarly, cold drinks, soda water, lemonade and other
aerated drinks, which are taxed at the rate of 25%, will
be cheaper.
Tax on these drinks will be reduced at least by 50%. This
is possible as the VAT regime envisages only four slabs of
the tax - 0%, 1%, 4% and 12.5% - in place of 32 slabs
enforced under the present system.
So, initially, the VAT will come as a blow to the state
exchequer, as it is expected to drastically reduce the tax
recovery, which is expected to touch around Rs 18,000
crore mark this year from Rs 14,500 crore of the last
year.
In the first year, a major portion of the loss due to VAT
will be on account of repayment of taxes on all unsold
items, even though they happen to be a carryover stock
from the last year. The loss this way is estimated to be
well over Rs 600 crore. Then there is a tax on raw
materials which will be abolished in the form of set-off.
This may cost a loss of around Rs 500 crore to the state
exchequer.
Notably, under the VAT regime, the entry tax through which
the state annually earns roughly around Rs 550 crore and
the development tax that accounts for over Rs 700 crore
will be abolished. Apart from this, around 1,900
commodities at present have taxes over 20%.
This will be reduced drastically, as the upper limit fixed
under the VAT regime could not be more than 12.5%. The
only items kept out of the VAT regime will be alcohol with
the highest tax slab of 32.5% and petroleum products with
25% tax at present. Besides, the state will also lose
around Rs 85 crore on account of its share in the Central
sales tax.
Source
: Times of India - India, dated 14/12/2007
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