VAT collections, however, is on track
Though the state government is expected to miss the 32 per cent growth target set for revenues for the year 2010-11, value-added tax (VAT) collections that account for around 65 per cent of its income are in line with the general market conditions.
As against the proportionate VAT target of Rs 23,452 crore for the nine-month period up to December, 2010, (for the full year Rs 33,328 crore), the tax department collected Rs 21,396 crore, which is 21 per cent higher than the cumulative receipts of the corresponding period last year. The growth has come from all the important segments, including general goods, according to Suresh Chanda, commissioner of the state commercial taxes department.
“Taxes (VAT) collected on petroleum products in the state have shown a 25.4 per cent rise while the growth in tax receipts on sale of general goods was around 24 per cent during the nine-month period,” he told Business Standard while stating that the achievement so far was in line with the normal growth that could be expected in the present context of general growth in economy and inflation among other factors.
Sales tax on liquor, which is the second highest revenue earner for the exchequer after commercial taxes, reported a subdued growth of 14.88 per cent for the nine-month period. “We cannot encourage people to drink more for the sake of taxes,” the commissioner said on a lighter note. The lower growth though is attributed to the decrease in consumption on account of higher prices of liquor. Besides sales tax, the state had estimated Rs 7,500 crore in the form of excise duty on liquor this year.
It is interesting to note that petroleum products and liquor alone comprise about 46 per cent of the total sales tax receipts while the rest comes from the sale of general goods. Of the total VAT receipts, petroleum products and liquor contributed Rs 6,300 crore and Rs 4,300 crore respectively, according to officials.
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The state government had set an ambitious target of over Rs 50,000 crore revenue for the current year, which is 32 per cent higher compared with around Rs 38,000 crore mopped up in the previous financial year. But the receipts were in the order of Rs 33,410 crore for the nine-month period ending December, 2010, as compared with the proportionate target of Rs 35,694 crore.
These growth targets are normally viewed as backward calculations based on budget expenditure projected for that particular financial year, as there is no scientific basis for calculating the growth in tax revenues. Though the government is presenting an annual budget with a size in excess of Rs 1 lakh crore for the third consecutive year next month, it is said that the actual expenditure has always been in the range of Rs 80,000 crore and Rs 90,000 crore owing to the gap in budgetary estimates and actual achievement, which includes share of central revenues and market borrowings in total revenues each year.
According to Suresh Chanda, the state planning department is now working out a formula to arrive at rational growth targets in tax receipts in a given year.
This exercise is expected to help taxmen see if the tax receipts are in line with the natural growth potential of a particular period or were there are any leakages responsible for not achieving the targets.