India: Revenue from Cigarette Sale in Punjab Lower This Fiscal Despite Higher VAT

Source from:  The Times of India  01/22/2014

As the Punjab cabinet on Monday announced to roll back value added tax (VAT) on cigarettes, latest figures available with the department of excise and taxation revealed that the decision to effect a massive tax hike of 144% on sale of cigarettes in the current fiscal was a result of poor judgment and unviable expectations in terms of tax returns on sale of tobacco in the state.

While restoring earlier VAT on cigarettes, the Punjab cabinet had reportedly admitted that the tax was being revised to curb smuggling of the product in the state. VAT on cigarettes has been reduced back to about 20%, which includes 10% surcharge, from 50% that was hiked at the start of the current fiscal. Punjab government had hiked VAT on cigarettes with a view to generate more revenue and deter people from smoking.

Sources in the excise and taxation department said the government rolled back VAT on cigarettes to 20% from 50% as Punjab generated just Rs 14 lakh higher than the tax collected in the last fiscal when VAT was less than half of being charged in the current financial year. Documents accessed by TOI revealed that Rs 71.69 crore were collected as VAT from May to December during 2012-13. However, despite increase in VAT, the tax collection during the corresponding period this fiscal could only touch Rs 71.83 crore. Enditem