The Himachal government anticipated a marked increase in revenues from the uniform tax structure, which other states and union territories in the region - Punjab, Haryana, Delhi and Chandigarh - have agreed to implement.
When the new regime becomes effective uniform tax rates will apply to petroleum, tobacco and automobile products. Currently there is wide variation in value added tax on various products. Being a consumer state, Himachal has been bearing the brunt of revenue losses as VAT levied on many items, especially tobacco and fuel, is less in several neighbouring states.
In Himachal VAT on petrol is 27%, which is less than that charged in adjoining states, while on diesel it is 11.5%. Several motorists prefer to tank up their vehicles at gas stations in nearby states, causing huge revenue losses to the already beleaguered exchequer.
Principal finance, excise & taxation secretary Shrikant Baldi said uniform taxation would benefit the state . "There is huge difference in VAT on tobacco in Himachal and Haryana. With uniform taxation we will not lose but gain," he told this reporter.
"A committee of taxation secretaries of all states who attended the recent meeting has been set up and would give its recommendation for adopting the uniform tax structure. However, Delhi has demanded its neighbouring states - Uttar Pradesh and Rajasthan - should also be included, since Delhi has same issue with Rajasthan and UP as Himachal has with Haryana and Punjab," he added.
There is a big difference in VAT levied on tobacco products in Himachal and Haryana due which traders resort to various tactics to evade tax. Not only tobacco but VAT rates on petrol and diesel also differ in northern states. VAT on petrol in Haryana is 21%, in Uttar Pradesh 26.8% and in Delhi it is 20%. VAT on diesel in Rajasthan is 22%, in Haryana 12.07%, in UP 17.48% and in Delhi it is 12.5%.
"Lower VAT rates in Punjab and Haryana have caused huge revenue losses to the state. If our VAT rates are brought on par with those being charged there fuel prices will be more or less the same everywhere," an excise official said.
Himachal earns annual revenues estimated at Rs. 500 crore from value added tax on petrol and diesel and Rs. 70 crore from on tobacco products.