Your shopping bill set to swell

HYDERABAD: At the end, it may not be the Telangana agitation, but the harsh steps being taken by the Kiran government in extracting revenue from all people that would vitiate the business scenario and derail the state's development.
The state government is all set to increase the Value Added Tax (VAT) from 4 per cent to 5 per cent on more than 3,000 commodities of common and daily use ranging from agarbathis to coffee to salt and dal.The move comes even though the Centre is grappling with rising inflation. Economists said that the Kiran government's move will hit the common man and businesses alike.
Realizing that the revenue generation is falling way behind the target, the Kiran regime has hit at the basic VAT slab in order to shore up the its coffers. The commodities include food items like rice, wheat, paddy, dal, pulses, tea, coffee, tamarind, jaggery, flour (atta), spices, skimmed milk, daily usage items like drugs and medicines, cosmetics, footwear, readymade garments, agarbathis and matchboxes as well as cotton, bricks, yarn, umbrellas, bicycles, tri-cycles, rickshaws, steel and aluminum equipment, iron, zinc, copper, bulk drugs, IT software, hardware, electrical calculators, microphones, telephone equipment, radio communication equipment, sewing machines, tractors, tyres, tubes and sports goods. By increasing one per cent tax, the state plans to raise an additional revenue of Rs 1,100 crore per annum. The VAT hike will affect all sections of the people because almost all essential commodities are incorporated in schedule-4 of the Value Added Tax Act, 2005., which as of now attracts 4 per cent tax.
"A high-level meeting chaired by Kiran Kumar Reddy has finalized the hike and it will be implemented after the finance ministers' meet in New Delhi on August 19," high-level sources told STOI. It was only last month that the government included sugar and textiles in schedule 4 of the VAT Act so that a tax of 4 per cent could be levied on these two items. Now, with the decision to increase the VAT on all items, sugar and textiles too will come under the 5 per cent VAT slab.
The inclusion of sugar in the VAT slab has already triggered protests with the sugar growing lobby up in arms while those having interests in the textiles sector too are unhappy Municipal administration minister M Maheedhar Reddy had written a letter to the CM on August 5 requesting him to review the decision to impose tax on textiles. Already, the VAT imposed on petrol and diesel in AP is the highest in the country. Justifying the hike, finance officials claimed that AP is among the last states to make such a move. "Except Kerala, all the other states have increased the basic VAT from 4 to 5 per cent. Tamil Nadu increased it after the assembly elections," commercial taxes commissioner Suresh Chanda told STOI.
But what the finance babus are not willing to admit is that if the state government agrees to increase the tax base, it will get more VAT compensation from the Centre. By not increasing the basic VAT slab in 2009-10, AP lost out on about Rs 1089 crore as central compensation it gets for levying VAT instead of sales tax. While the state claimed that it will take some time before the hike pinches the common man as dealers and manufacturers cannot pass on the VAT hike to the consumers on their existing stocks, sources said the unscrupulous trading lobby will not spare people.