Sharp tax hikes in Uttar Pradesh irk businesses, consumers

September 20th, 2008 - 8:10 pm ICT by IANS  

Lucknow, Sep 20 (IANS) The Uttar Pradesh government’s decision to sharply hike the value added tax (VAT) in the state and also impose an entry tax on certain items has raised the hackles of both businesses and consumers in the state.The state government took the decision late Friday evening.

While the increase in the VAT will lead to rates that vary from 12.5 to 21 percent as compared to the earlier 4 percent, the rate of entry tax will be between 2 to 3 percent.

The hike in VAT and the new tax will fetch over Rs.1 billion to the state exchequer.

Consumable and electronic goods like tea, mobile phones, television sets, laptops, electrical goods, steel, iron and their products, arms and ammunition and several other products will cost more in the state with the implementation of the new decision.

Strongly reacting to the decision, Mukesh Tandon, general secretary Indian Industries Association (IIA) said, “The step would restrain industrialists from investing in Uttar Pradesh”.

Similarly, Sudhir Srivastava, an executive with a finance company in Lucknow, said that he has put on hold his plan to buy a laptop computer after this decision.

“I was to buy a laptop this week, but now I have put off the idea,” Srivastava said.

The entry tax was first implemented in the state in 1999 by the then Kalyan Singh government to meet the additional financial burden to implement the Fifth Pay Commission report.

And now the present government is under pressure to mobilize funds to implement the the Sixth Pay Commission.

While an entry tax of one percent has being imposed on iron and steel and all categories of motor vehicles and chassis, except tractors, an entry tax of two percent will be imposed on aluminium and its products, barring utensils; all kinds of cables, laptops, televisions, tyre and tubes, except cycle tyres and tubes and tyres used in animal driven carts, and marble stones and tiles.

“Since now the customer will have to pay more, he will insist on buying the product without a bill, so that he can evade the tax,” said Sameer Khan, a trader of car accessories in the Lal Bagh area of the state capital Lucknow.

On cell phones and their batteries, an entry tax of three percent has been levied, while five percent has been levied on refrigerators, air-conditioners and air-conditioning plants.

VAT on computers, telephones and its parts, cell phones, satellite phones, DVDs, CDs, teleprinters, wireless equipment, molasses, pipes of all varieties, and several other electronic and electrical goods has been increased to 12.5 percent from 4 percent.

“Already the prices of essential commodities are sky-rocketing and the middle class is struggling to meet both ends. At such a time, this tax hike is like rubbing salt on a wound,” said Rakesh Tripathi, a cashier with a public sector bank in Lucknow.

The maximum increase in VAT has been in case of turbine fuel, CNG and naphtha, where the rate has been increased from one percent to 21 percent.

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