Govt slashes VAT rates in bid to increase tax net

VAT is the largest source of revenue for the government in the capital. In the 2016-17 budget estimates, it accounts for 67 per cent or Rs 24,500 crore of the total revenue of Rs 32,525 crore. Chief Minister Arvind Kejriwal said, “We have full faith in the people of Delhi. They will willingly pay VAT and ask for bills.”

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Asked if reducing VAT rates on several items would affect the government’s revenue stream, Sisodia said the government had learnt from slashing VAT rates on timber from 12.5 per cent to 5 per cent during the last budget.

“This did not reduce the tax collection. In fact, by rationalising tax, more people come into the tax bracket. We will continue to reduce tax in the coming years,” said Sisodia.

He added that in the next four years, the government hopes to have the lowest VAT rates in the country. Government sources also said the move would widen the tax net in Delhi and ensure better VAT collection.

In his speech, Sisodia stated that the government suffered from no shortage of financial resources. “However, there was a shortage of integrity and honesty. Tax collection is automatically enhanced when there is an honest government in office. Therefore, in this financial year, we have seen a historic growth of 17 per cent in tax revenue, 31 per cent in state excise and 21 per cent in stamp duty,” he said.