VAT boon for Haryana

New tax system is expected to boost revenue by Rs 500 crore

While a number of states are still weighing the pros and cons of implementing the value-added tax (VAT), Haryana has clocked an additional revenue of 43 per cent due to the implementation of the new tax regime.

Towards the end of last fiscal, the state's revenue collection has shot up to Rs 4,778 crore in 2004-05 from Rs 3,346 crore in 2003-04.

Haryana also hopes that the VAT-based taxation system will boost its revenue collection by approximately Rs 500 crore.

According to Haryana Finance Minister Birender Singh, the Haryana experience should be emulated by states that are resisting the implementation of the VAT.

"Not only has the tax collection gone up since the implementation of the new regime, the retail prices of essential commodities like grains, pulses, fruit and vegetables, electrical appliances, consumer goods have also remained stable compared with Delhi, Punjab and the like during 2004-05," Singh said.

Singh said this during a recent interaction with the senior members of the Associated Chambers of Commerce and Industry of India (Assocham) in Chandigarh.

"The experience of Haryana in the last two years shows that the VAT also spurs the growth of tax revenue. From sales tax, both local and central, Haryana under the VAT system collected Rs 3,843 crore in 2003-04," he said.

Making a comparison with the national economy after Haryana adopted the VAT, Singh said, "while the national economy grew by 8.4 per cent in 2003-04 and is estimated to grow at 6.9 per cent in 2004-05, the gross state domestic product of Haryana recorded a growth of 8.6 per cent in 2003-04. It is almost the same as the national average, but the growth rate in the manufacturing sector at 7.5 per cent was higher than the national average of 6.6 per cent."

But in 2004-05, the state economy was estimated to record a growth of 8.5 per cent, about 2 per cent higher than the national average estimate, he added.

Haryana has adopted a four-tax rate structure that is 0, 4, 10 and 12 per cent with the exception of 1 per cent on bullion and precious stones and 20 per cent on liquor consumed in bars and clubs and petrol.

"By the end of the current fiscal, we hope our revenue collection will go up by Rs 500 crore because of the VAT-based taxation system," Singh said.

To reduce compliance cost of small dealers, Haryana provides for payment of a lump sump tax for a new specified category of dealers, which include work contractors, halwaii, plywood, lottery dealers and retailers barring importers.

He said no industrial incentives were being given to new units. Just the sales tax incentives granted earlier had been converted into deferment of tax for the remaining period, he added.

These units have also been granted the option of making payment and the full credit is passed on the purchasing VAT dealer.

In case of deferment, the deferred tax is to be converted into an interest-free loan, to pass on the tax credit to the purchasing VAT dealer.

Appealing non-VAT states to implement the new tax, Assocham President Mahendra K Sanghi said it would lead to a higher revenue generation.