It is official now that Punjab?s lure for luxury cars has given a strong push to the value added tax kitty.

A Venu Prasad, excise and taxation commissioner, Punjab, told FE that ?there has been a 35% VAT increase in the automobile sector as the car sales were much more than last year?.

?As against Rs 400-crore VAT recovery from car sales last year, the first seven months of this year upto October 31, saw a VAT collection of Rs 600 crore?, Prasad said. Going by the trend, the state is sure to collect record VAT this year mainly because of Punjab?s lure for luxury cars.

Punjab has in fact turned into a hot market for new dream machines in the luxury segment. Not only BMW, Skoda, Audi, Volvos or Mercedes but people here own Bentley and Rolls Royce Maybach. This is the new found fad of Punjabis that if you have it flaunt it. Little doubt people are splurging on big cars. World’s major automobile makers-Jaguar Land Rover Audi, BMW Volvo and Mercedes have not only reached Chandigarh but also the industrial hub of Ludhiana.

The value added tax kitty in Punjab had swollen to Rs 6,000 crore during the period from April 2010 to October 2010, the first seven months of the current year as against Rs 4,500 crore during the corresponding period last year. Buoyed by the high VAT collection, the state government has set a target of Rs 10,000 crore VAT by the end of the year.

Also for effective administration of tax and to plug loopholes, the excise and taxation department in the state has decided to appoint 118 new inspectors and 74 new excise and taxation officers.

With better economic planning, the state was making rapid strides on the development front. In addition to a quantum jump in sales of cars in Punjab, the 3.42% grown in agriculture last fiscal, which is more than double the national growth rate of 1.8%, would also add to VAT collection.

The only cause of worry for Punjab, once the top state in per capita income in the country, is the huge debt of over Rs 70,000 crore.

Sources told FE that deputy chief minister Sukhbir Singh Badal had recently met RBI governor D Subbarao to apprise him that Punjab is on a growth path contributing 70% to the national food kitty and deserved cheaper food credit from RBI.

The deputy CM told him that Punjab farmers were reeling under Rs 35,000-crore debt of unorganised financial channels and under a debt swap scheme farmers can take a loan from the bank and repay the moneylender. Officials told that Subbarao was bullish about the growth of state economy and hoped Punjab would again lead from the front.