The Odisha government will lose revenue of Rs 300 crore if five per cent VAT (Value Added Tax) on processed food items is withdrawn, said a government official.
"We have followed the rate fixed by the empowered committee of finance ministers while moving over to VAT system from Sales Tax. If we scrap it, there will be loss of revenue of Rs 250-300 crore as major sales of food items happen through retailers, who mostly procure their stuff from outside the state with very small presence of local food processing industries in the sector," said Manoj Ahuja, commissioner of commercial taxes. Ahuja was speaking at an interactive session organised by Confederation of Indian Industry (CII).
Neighbouring states like West Bengal, Chhattisgarh and Jharakhand do not levy tax on wheat and wheat products.
Officials said, it will be difficult for the state government to compensate the loss of revenue if the VAT is withdrawn on pulses, wheat and wheat products. Recently, the traders were on strike demanding withdrawal of five per cent VAT on sales of pulses, wheat and wheat products. Refuting the claims of the traders that the state government collects about Rs 30 crore VAT from pulses against the target of Rs 225 crore, officials said, the revenue is growing year by year and it has touched about Rs 40 crore now.
The state traders had proposed imposition of one per cent entry tax in place of VAT which they claimed would fetch Rs 50 crore revenue per annum. After getting assurance from the state government to consider the waiver of five per cent VAT (value added tax) on pulses, wheat and wheat products, the traders had called off their strike during which they had stopped import and sale of these essential food items. Niranjan Mohanty, Convener, MSME Panel, CII Odisha pitched for changes in VAT structure for development of ancillary and downstream industries. Mohanty also proposed exemption of VAT on food items to help the large scale food processing units to import their raw materials.
