VAT collection hits target

For the financial year ending 31st March, 2008, Punjab VAT collections have hit the target of Rs 5778 crores. As per the actual data available from Excise and Taxation Department, in the year 2007-08, an additional Rs. 750 crores have been collected as VAT against the previous year of Rs 5136 crores. Another noteworthy point is that whereas in the previous year 2006-07 there was downward revision of budget target, the year 2007-08 saw no downward revision from the initial estimates.

 

VAT remains major revenue source and still going stronger

Revised estimates for 2007-08 put the VAT revenue at Rs 5778 crores against Rs 10346.83 crores of total State tax revenue (this includes Land Revenue, Stamps & Registration, State Excise, State VAT, Motor Vehicle Tax and Electricity Duty). These figures for the years 2005-06 and 2006-07 stood at Rs 4626.87 crores/Rs 8989.38 crores and Rs 4829.02 crores/Rs 9017.26 crores respectively. VAT collections over the last three have been more than half of the total state tax collections and have increased to over 55% in 2007-08.

VAT records a high growth rate

The year 2007-08 has recorded a higher growth rate of 21.9% considering Excise and Taxation actual figures of 2007-08 w.r.t. Accounts figures of 2006-07. This higher growth can be attributed due to mainly three reasons 1) lowering of VAT revenue base in 2006-07 due to diversion of 10% VAT collections to Punjab Municipal Fund from September, 2006, 2) imposition of Punjab Entry tax from November, 2007, and 3) better tax compliance in 2007-08. Growth rate for 2007-08, w.r.t. department actual of Rs 5136 crores in 2006-07 comes out to be 14.6%.

But, again for the year 2008-09, a meager growth of only 6.9% has been projected with a target of Rs 6290 crores. Understandingly because of a) no tax budget in the line with union budget keeping in view of upcoming parliamentary elections, and b) government proposal of starting a new fund for strengthening social and healthcare initiatives in the state by siphoning funds out of VAT.

Rise in tax collection charges

In 2006-07 Punjab VAT collection charges were Rs 41.78 crores and these rose to Rs 52.77 crores in 2007-08. In percentage, VAT collection charges per VAT receipts come out to be 0.87% for 2006-07 and 0.91% for 2007-08. This marginal increase is likely to be controlled by the recent e-filing measure taken by the excise and taxation department. With more and more taxpayers switching to online tax returns, tax collection charges are likely to be contained.

Conclusion

Though VAT is the major tax revenue contributor in the Punjab, this cannot be the only answer for getting the much needed economic buoyancy in the State. VAT has started showing good dividends and need is to aim at higher targets with new initiatives but not at the cost of harassment to tax payers. At the same time, there is need of making concerted efforts at other tax sources so that other State levies also start contributing significantly to the State exchequer.