VAT increased as Govt clambers to control deficit

26 Feb '08

2 min read

The State Government of Gujarat has introduced additional taxes worth Rs880 crore for financing its developmental plans that focuses on human development index (HDI).

Value added tax (VAT) for the coming fiscal year will be increased by 1 to 2.5 percentage points. An addition of one paisa tax will be levied on goods which are currently charged four paisa.

On the other hand there will be an addition of 2.5 paisa for other taxable goods where VAT is currently 12.5 paise. However, the Government has found it most appropriate to exempt petrol and diesel from the burden of additional tax.

Although the total size of the budget is Rs48,983.99 crore, the Government has gauged a gross deficit of Rs 876.20 crore for the year 2008-09. This gap is expected to be filled by additional income worth Rs880 crore from supplementary tax on VAT as well as transfer of Rs120 crore to local bodies as professional tax.

Summing up, on an average, the deficit would be brought down to 116.20 crore. Besides in a press conference, Vajubhai Vala, State Finance Minister, reiterated that that the proposed additional tax was not an alternative to octroi. He further stated, “The state Government has been given certain powers to increase VAT. Also, there are many items like pulses and grains on which the Centre has allowed us to levy taxes but we have preferred not to do so”

Mr Vala further said that the 11th Five Year plan had an allocation of Rs1,06,918 crore, which is more than what the state had spent in the past 47 years since its formation in 1960. Till now, the state has spent Rs1,03,619 crore.

The average growth rate for Gujarat in the last five years was 10.4 percent against a target of 10.2. For the 11th Plan, a target of 11.2 percent has been set and presently the state is already moving towards achieving a growth rate of 11.3 percent.

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