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Tax collection declines due to sealing in Delhi

VAT contributes the maximum to the Govt earnings, almost 60 per cent of the Govt income comes from VAT, reports Amitabh Shukla .

india Updated: Dec 14, 2006 22:33 IST
Amitabh Shukla
Amitabh Shukla

The ominous signals from the sealing drive have now become obvious. For the first time, the monthly collection of Value Added Tax (VAT) has come down affecting the finances of the government.

What has send shock waves to the officials is the growth percentage of VAT. Last year (2005-06), the growth in revenues was a healthy 27 per cent as compared to the financial year 2004-05.

This year, the percentage of growth is merely 19 per cent (till November) sending a chilling reminder to the government that the finances are not upto the expectations.

In the month of October this year, the figures of which have been tabulated now, the VAT collection actually declined though the projections indicated that it would grow at a rate of around 20 per cent. This was the first time in recent memory that collections declined.

Officials point out that closure of shops due to trade bandh in protest against the sealing drive also contributed to the erosion in tax collection.

In November, the collections increased but it has been attributed to the festival season in which the people go for a shopping spree.

Officials are now anticipating a further slump down in the next couple of months. "Our initial estimates for tax collection might be affected by the end of the financial year," a senior official admitted.

Finance Minister AK Walia said the shortfall in collection might be due to the sealing drive.

"Sealing, trade bandh and slump could be the reasons. We have a few months to go before the close of the financial year and things would look up," claimed the minister.

Alarmed at the shortage in collection, the finance minister called a review meeting on Thursday. He directed the officials to check evasion and focus on trades from where more collection can be made.

VAT contributes the maximum to the government earnings. Almost 60 per cent of the government income comes from VAT. This is followed by earnings from Excise and Stamp duty.

In the last financial year, the government had collected Rs 5682 crore from VAT - the money which is used in constructing flyovers, roads and other projects.

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First Published: Dec 14, 2006 22:33 IST