Our Bureau

Hyderabad, Feb. 3

WHILE the VAT (value-added tax) system remains an enigma to many, it brings cheer to consumers in the State as prices of medicines, LPG, cement and toothpaste are set to fall with effect from April 1.

The tax rate on drugs and medicines will be cut by six percentage points from 10 per cent to four per cent. On cement, the rate will be reduced to 12.5 per cent from 16 per cent. The tax on LPG would be 12.5 per cent as against 16 per cent.

Kerosene would be taxed at a rate of eight per cent (four per cent). Hotels with over Rs 40 lakhs turnover a year needed to pay 7.5 per cent.

Addressing a press conference here on Thursday, Mr K. Ramakrishna, Minister for Commercial Taxes, said tax on toothpastes and cosmetics would be at 12.5 per cent (20 per cent). Lubricants and other petroleum products (excluding petrol and diesel) would come under the 12.5 per cent (16 per cent) bracket.

But will this anomaly desist the dealers from acquiring stocks? The Minister clarified that they need not worry on this account. The sales tax paid on stocks held as of April 1, 2005, would be reimbursed on the basis of the respective APGST rates paid for such stocks.

Elaborating on the VAT Ordinance promulgated recently, the Minister said there was no cause to worry. It would simplify things and ensure a uniform tax structure across the country.

The Centre had agreed to compensate the losses, if any, to the States.

Though the Bill was passed by the erstwhile Telugu Desam Government, the Congress decided to bring in a new Bill, incorporating suggestions from the taxpayers and the public.

Appealing to the traders to register themselves to let the State prepare for the upcoming regime, the Minister said businesses with less than a turnover of Rs 5 lakh need not register.

The turnover limit for VAT registration was Rs 40 lakhs and above a year. Dealers between Rs 5 lakh and the threshold limit of Rs 40 lakh would pay a turnover tax of one per cent.

The VAT Ordinance excluded 47 items including poultry, milk, vegetables, coarse grains, sugar, handlooms and agricultural implements operated manually.

Ninety-one items would attract four per cent tax. This list included agricultural produce, agricultural inputs and readymade garments.

Gold, silver and jewellery made of gold and silver would attract a rate of one per cent.

The Minister said VAT would give a big boost to exports. All goods exported from Andhra Pradesh to outside India would go without any tax burden as regards the tax paid or payable in the State.

All sales made from domestic tariff area (DTA) to the units located in Special Economic Zones would be treated as exports.

Items exempted from VAT

HYDERABAD: The items exempted include books, periodicals, jowar, maize ragi, sugar, condoms, handlooms, blood, blood plasma, slates, prasadam, implements used by the handicapped, betel leaves, electrical energy, vegetables, meat, fish, chicken, fishnet, fishnet fabrics, fresh milk, and pasteurised milk.

(This article was published in the Business Line print edition dated February 4, 2005)
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