Govt slashes VAT to stop outflow of taxes

In a major relief for Delhiites, the city government on Monday proposed to reduce VAT on a slew of products, including sweets, namkeens and readymade garments, from 12.5 to five per cent.

Announcing the proposal in the Delhi government’s Budget for the financial year 2016-17, deputy Chief Minister and Finance minister Manish Sisodia said that sweets and namkeens are daily consumable items and needed to be made cheaper.

“Due to transparent, honest, efficient and effective governance, our government is reducing taxes and VAT, and soon within four to five years, taxes in Delhi will be the lowest in India,” Sisodia, said.

Sisodia further said that multiple entry relating to some items create ambiguity and confusion which leads to harassment of traders. It has been attempted to simplify the taxation by bringing them in one entry.

Sisodia said that VAT on battery operated e-rickshaws, hybrid vehicles has been proposed to be reduced from 12.5 per cent to 5 per cent.

He also announced reduction in the VAT on marble from 12.5 to five per cent.

He announced that VAT on watches costing above Rs 5,000 has been proposed to be reduced from a high 20 per cent to 12.5 per cent.

He said that readymade garments upto Rs 5,000 are taxed at 5 per cent, those above Rs 5000 are taxed at 12.5 per cent. However, in the neighbouring states UP and Haryana, all readymade garments are taxed at 5 per cent. “Thus, our government proposes to rationalise the tax rate by taxing all readymade garments at 5 per cent,” said Sisodia in his speech.

Delhi government has proposed VAT at the rate of 5 per cent on school bags, which having MRP upto Rs 300 and MRP above Rs 300 are taxed at 5 and 12.5 per cent currently.

Delhi government has proposed rationalised tax on textiles and fabrics by applying uniform of 5 per cent on all varieties of textiles and fabrics except Khadi and handloom fabrics.

“We tried to bring balance in the rates of goods in Delhi at par with other states to avoid outflow of taxes. It was made possible through voluntary compliance, and not through imposition,” he said.