Punjab to lose Rs 100 cr on VAT cut

Ruchika M Khanna

Tribune News Service

Chandigarh, March 4

Notwithstanding the fall in revenue, the Punjab Cabinet today approved Value Added Tax (VAT) rationalisation for some goods.  The decision has been taken just before the Budget session that will be held between March 12 and 25.

By giving its nod to either doing away with e-reporting on sale of goods (eTRIP) for major items of consumption in Punjab or reducing VAT on Aviation Turbine Fuel (ATF), the move of the Cabinet, which met under the leadership of Chief Minister Parkash Singh Badal, will only be leading to a further dip in the state’s total VAT collection.

When in 2013, the state government had introduced eTRIP, the government had projected that it would help increase VAT by Rs 250-300 crore. Though the exact details of loss in revenue have not been worked out, sources say that the state government will lose around Rs 100 crore in revenue through these “relief measures” approved today.

With the Cabinet nod for doing away with eTRIP system for iron and steel, yarn, mustard, cotton, vegetable oils and paper board, sources in the government admit that tax compliance will certainly decrease and hit VAT collection. 

Officials in the Excise and Taxation Department insist that they would come up with some other methods of tax compliance, but till then, the loss in revenue will have to be borne. The Cabinet has also decided to reduce VAT on Aviation Turbine Fuel (ATF) from 6.05 per cent (including surcharge) to 4.04 per cent for all scheduled and non-scheduled flights. 

Government sources say that the loss will be notional as in the long run, once the Mohali International Airport gets commissioned, the airlines will refuel from here and the jump in sales will offset the loss in VAT cut. 

To bring in additional revenue, the Cabinet has decided to increase VAT on natural gas that is used in large quantities by fertiliser plants in the state. VAT rate has been increased from 6 to 14 per cent. 

As a result of the fall in price of crude oil and subsequent fall in price of natural gas, the state’s VAT kitty has suffered a loss of Rs 39 crore under this head. By increasing the VAT rate, the state hopes to offset this loss. 

Some plastic products have also been brought under VAT and the government hopes to rake in an additional Rs 20 crore VAT through these.

It may be mentioned that as against a projected growth of 15 per cent in VAT collections for the ongoing fiscal, this tax is growing at just 6.01 per cent over last year (the audited figures show that VAT collection till November 2014 was Rs 10,589.27 crore as against Rs 9,988.70 crore between April and November 2013). The state had set the target of collecting Rs 17,760 crore as VAT in 2014-15.