Punjab likely to be front-runner in VAT collection with 43% growth this fiscal

Punjab has shown an unprecedented growth in the collection of Value Added Tax (VAT) and if trends available are any indicator, the state may turn out to be front-runner in VAT among all northern states.

The Punjab government had projected a figure of Rs 6,290 crore for the year 2008-09 as far as VAT collections are concerned which was 20 % above the VAT collections in 2007-08. However, data compiled by the excise and taxation department shows that actual growth was much above the projected figure and close to 43%. If this trend continues, Punjab may become the front runner state in VAT as neighbouring Haryana has projected a growth of 21% for 2008-09.

For record, Haryana stands at number three with 21% growth projections in VAT for 2008-09 in the country while Andhra Pradesh, with a high growth rate of 24% , is number one state while Bihar stands at number two with 23% growth in VAT during the previous year. Punjab had a 14% growth in 2007-08.

Punjab had collected from VAT Rs 1,677 crore last year till July. Significantly the collection under this head for the same period this year are Rs 2,373.21.

The excise department sources told FE that registration of more than 15,000 more traders under VAT during the current fiscal, besides improvement in VAT billing and sustained efforts in ensuring compliance. Revenues from stamp and registration duties jumped by over 25% till July compared to the corresponding period last year. Collection from stamp and registration duties rose from Rs 548.34 crore for the first four months of last fiscal to Rs 686.69 crore for the same period this year.

Another factor that led to buoyancy in VAT was the fact that the Punjab government ruled out reduction on VAT on petrol and diesel in the state which is at present 27.5 and 8 % respectively and highest among all the northern states. In fact in the state capital Chandigarh, the VAT on petrol is 22 %. A major portion of VAT in Punjab comes from petroleum products and last year of total VAT collections, VAT from petrol only accounted for Rs 1,239 crore, agriculture accounted for Rs 592 crore, liquor Rs 24 crore, automobiles Rs 497 crore and other services Rs 2,317 crore.

The finance department sources said that plugging loopholes and checking rampant tax evasion among traders of the state were also the keys to better showing this year. The poor condition of mobilizations of resources was a matter of concern as the state government could collect just Rs 50 crore from change of land use charges and royalty from non-ferrous minerals against the target of raising Rs 410 crore, which was fixed in budget 2007-08. Sources said Punjab could have done much better had auction of liquor vends brought more revenue. Actually, Punjab state is anticipating low growth of 6.02 % from excise levy on auctioning of liquor vends at Rs.1,830 crore in 2008-09 against collection of Rs.1,726 crore in 2007-08. The growth under this parameter was 26.20 % in 2007-08.