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Burden will be on manufacturers, not consumers: Government

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  7 July 2016 12:00 AM GMT

By Our Staff

Reporter

Guwahati, July 6: Under fire, Chief Minister Sarbanda Sonowal defended his government’s move to hike VAT by 1 percent from 5 percent to 6 percent on a range of commodities, citing the State’s poor fiscal health even as he claimed that the burden would not be passed on to consumers.

He said that most other state governments had taken this step long ago to mobilize resources, but the previous government in Assam ignored it deliberately.

Sonowal said the burden will be on the companies, and consumers will not have to pay more than the MRP (maximum retail price) on commodities.

A government release claimed that no tax changes have been made in respect of essential commodities.

“Essential commodities like paddy, rice, wheat, dal (pulses), sugar, salt, atta, maida, suji, besan, sago, bread, unstitched textile fabrics are all exempted from tax under the Assam VAT Act. No tax changes have been made in respect of these items,” the release said.

With regard to increase in tax rate on items of mass consumption, the government said that out of 131 items in Second Schedule, on which tax rate has been moderately increased from 5% to 6%, many items including medicines are governed by MRP system.

“Hence, 1% increase in tax rate will not cause any increase in prices as the consumer will continue to pay the same MRP, and hence it will not put any additiol burden of tax on the consumer. It will not create any inflatiory impact on the common man and consumers as the MRP of these goods has not been changed. Further it is also a fact that in the MRP fixed by a manufacturer, there always remains a margin to absorb any moderate tax hike,” the statement said.

Out of 131 items, Declared Goods like iron & steel, coal, steel pipe, jute, oil-seeds, hide & skin will continue to be taxed at 5% as these items are covered by Central Sales Tax Act, 1956. This apart, more than 13 items out of 131 items were removed earlier from the Second Schedule. Other than above items, tax-rate on other commodities have not been changed, the government said.

The government was, however, silent on the withdrawal of partial exemption granted to oil companies on sale of LPG (cooking gas) for domestic use, which would put an additiol burden of Rs 14 on the consumer.

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