I was amazed to read that Mr. Manohar Parrikar has promised to reduce the price of petrol in Goa by Rs. 11 and I was really curious to see how he managed this, and how big a hole this will put in the State’s finances.
The way he has managed this Rs. 11 reduction is by abolishing (almost) the VAT on petrol which used to be 20%. This is now only 0.1% and it has not been brought down to zero so as to maintain sales records.
The thing that amazed me most was that this step will not lead to a revenue loss but the Goa government is actually projecting an increased realization of Rs. 470 crores from VAT, Entertainment Tax, Luxury Tax, and Entry Tax!
The source of this information is the budget speech document (pdf) and I don’t know how far these projections have been accurate in the past but they have raised the rates on a whole host of other things in order to plug the loss from the reduction in VAT.
From the budget document, here are the things on which taxes have been increased.
Value Added Taxes
195 VAT on IMFL (Indian Made Foreign Liquor) and Beer to be increased from 20% to 22%.
196 VAT on Carbonated beverages (Coke, Pepsi etc.) increased from 12.5% to 20%.
197 VAT on junk food and fast food increased to 20%. (Not mentioned how much it was earlier)
198 Levy a tax rate of 15% on cars and SUVs sold at more than Rs. 15.00 lakhs. Same thing is applicable on bikes that cost more than Rs. 2 lakhs.
199 Levy 5% VAT on textile fabrics.
200 Entry tax on Naptha increased from 12.5% to 15%.
202 Tax on cigarettes increased to 22%.
211 Entry fee on casinos reduced from Rs. 2,000 to Rs. 500 but the license fee increased to Rs. 6.5 crores – these two measures are expected to net themselves out.
213 Entertainment tax on casino games to be increased from 10% to 15%
214 Space being rented out for use of commercial activities to be brought under the ambit of luxury tax at the rate of 5%.
215 Services provided in a beauty parlor or spa to be covered under luxury tax of 10%.
218 Raise the rate of entry tax on coal and coke to 2%.
219 Increase the rate of entry tax on SUVs and bikes which exceed Rs. 15 lakhs and Rs. 2 lakhs to 15%. I’m not quite sure whether this is in addition to the 15% VAT.
220 The effect of all this is that they expect to raise additional revenue by Rs. 470 crores.
Please note that this is not a complete list of all the items and I’ve excluded some other items like Gensets – the rates on which have also gone down. I’ve done that because I was primarily interested in seeing what rates they have increased to manage this extra Rs. 470 crores.
I must emphasize again that these are the only numbers I’ve seen, and this is the first time I’ve seen such a thing so it is possible that I may have missed an increase mentioned in the document which turns out to be quite important. Also, I’ve not seen the absolute numbers for any of these items as it was last year so it is hard for me to say how realistic this additional realization really is.
If you have any knowledge on that – fire away!