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Govt Justifies VAT Increase

Andhra Pradesh has been losing over Rs. 2,000 crore every year by not raising the floor rate of VAT, says a CMO release.
Hyderabad | 15th September 2011
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The state government on Thursday clarified that the floor rate of Value Added Tax has not been increased from 4% to 5% yet.

However, the Chief Minister Office's issued a release explaining the consequences of the delay in the increase in the lower slab of VAT by 1%.

According to the CMO's release, the Central government has been compensating states for the loss of revenue on account of reduction in the rate of CST from 4% to 2%. However, in order to reduce its burden, the Centre has been advising states to raise the floor rate of VAT by 1%.

11 states, including Tamilnadu, Karnataka, Maharashtra, Gujarat, Orissa, Madhya Pradesh, Uttar Pradesh, Rajasthan and Karnataka, have already raised the rates from 4% to 5%.

Andhra Pradesh has not increased the floor rate yet. The rate of 4% was first imposed when VAT was introduced on 1 April 2005. No change has been made in this rate for the last 6 years.

Recently, the Centre informed the AP government that the compensation payable would be reduced by the amount of revenue that could be gained by raising VAT from 4% to 5%, even if the rate is not raised.

During the year 2010-11 alone, the deduction made by the Central government on this account has been Rs. 1,089 Crore. In addition, the state government has been losing an equal amount because the floor rate of VAT has not been increased. So, effectively, Andhra Pradesh has been losing over Rs. 2,000 crore every year by not raising the floor rate of VAT.

The CMO said that the Chief Minister, in a recent statement, had said that AP has lost twice by delaying the increase the lower slab of VAT by 1%.

However, analysts say that Thursday's clarification by the CMO is an indication that the government is preparing ground to increase the VAT in the next few days. (INN)
filed in:  VAT, Finance
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PURUSHOTTAM LATH on 17th Mar 2013, 7:20am | Permalink
VAT increase is justified but it is seen that fund generated from Publice are misused upon luxurious amenities to Harami officials and legilators of Govt. This should be avided

Purushottam Lath, Gorakhpur
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