West Bengal hikes 1% VAT on luxury household items

West Bengal hikes 1% VAT on luxury household items

Kolkata: The West Bengal government has announced an increase of 1% Value added Tax on luxury household items, electronic gadgets such as cooking range, washing machine, refrigerator, music system, cosmetics and motor cars. The decision comes in the wake of a financial crisis, that has hit the state.

State finance minister Asim Dasgupta, while admitting that everything was not fine with the fiscal health of the state, said that by increasing the VAT on these items from 12.5% to 13.5% and by cutting the non-plan expenditure by 10%, the state would be able to overcome the crisis in next four months.

Since the state Assembly is not in session, the government would pass a special ordinance to implement its decision. According to the minister the increase on VAT would be effective on and from 15 November 2010.

Blaming the Centre entirely for the financial problem in the state, Dasgupta said that the state was yet to get Rs7000 crore from the government of India on account of coal royalty, drought and aila grants and the financial assistance for introducing FRBM and GST. "We are supposed to get Rs4,833 crore as coal royalty, due from 1991. On account of FRBM, the state should have immediately received Rs700 crore," Dasgupta elaborated.

Replying to reporters he said that financial problem is nothing alien to the state. In his tenure, which sums up to 20 years, the state has faced the crisis three times. In fact, 2000 to 2002 were the worst hit years. In fact, the state finance department had to introduce stringent measures to cut down on unnecessary financial expenditure in the non-plan head.

He also said that taking overdraft from the RBI was nothing new either for the state or for the Centre. The state takes it to maintain equilibrium between its earnings and expenses, whenever required.

Dasgupta is hopeful of raising Rs1200 crore from checking 10% expenses in the non-plan head and through the increase in VAT. "In next four months things would look up," he added.