The Hindu Business Line : 12.5% VAT imposed on tobacco

GETTING READY: The West Bengal Finance Minister, Dr Asim Dasgupta, with the Chief Minister, Mr Buddhadeb Bhattacharjee, before the presentation of the Budget on Friday. — Sushanta Patronobish .

Kolkata March 16 The West Bengal Government, following the decision to phase out Central Sales Tax (CST) from four per cent to three per cent in 2007-08, followed by a periodic review with full phase-out by 2010-11, has proposed to levy Value Added Tax at the rate of 12.5 per cent on tobacco and tobacco-products (excluding bidi).

Presenting the State Budget for 2007-08, the West Bengal Finance Minister, Dr Asim Dasgupta, said with the introduction of VAT, it would be necessary to phase out CST imposed on inter-state sales as this tax "is considered distortionary and incompatible with VAT".

It had, therefore, been decided to phase out CST on the basis of an agreement reached with the Union Finance Ministry regarding compensation package for any loss of revenue. The present proposal to reduce CST is in response to this agreement.

Dr Dasgupta said the compensation package consists of "additional powers of compensation by the states as well as monetary compensation by the Centre". The states are now empowered to levy VAT on tobacco and tobacco products. Accordingly, a proposal to levy VAT at the rate of 12.5 per cent on tobacco and tobacco products has been laid before the House. It is expected that this will generate additional revenue of Rs 50 crore for the state in the next financial year, after compensating for the loss on account of CST reduction from four per cent to three per cent.

Other proposals

The Finance Minister has also proposed "to give liberty to manufacturers of country spirit to declare maximum retail price for their products".

The excise duty will be linked to the maximum retail price. It has been proposed to remove the restrictions with regard to the area of business of the manufacturers. "They will now be authorised to do their business throughout the state. This measure will encourage fair competition, more production, transparency and is expected to yield additional revenue of Rs 30 crore during the next financial year," Dr Dasgupta said.

More Stories on : Tobacco | Taxation | Budget | West Bengal

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