Wednesday 02 December 2020

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Economy | Finance

Yet another price-rise on anvil due to uniform taxes

 

Goa's famous cashew and coconut fenny, cashew nuts and cashew kernels, its special 'panv' (bread), pastry or even the soft drinks may cost dearly to the tourists visiting the coastal state, thanks to the uniform tax policy adopted by the states nation-wide.

True, it remained adamant initially over some specialised local products or the ones beneficial to the tourists as well as locals. But the central government's warning to cut off its financial assistance has now compelled the tiny state to fall in line.

"We have no other alternative", says chief minister Francisco Sardinha, after returning from attending the sixth inter-state council meeting in Delhi. He has already instructed the sales tax department officials to put up a cabinet note in this regard.

If not agreed upon, the cash-starving youngest state would be deprived of at least 25 per cent of the assistance it has been receiving from the centre. The state has already been suffering as the assistance has reduced from 85 per cent in 1987, when Goa was granted statehood, to mere 23 per cent now.

In fact, criticising the criterion followed in the Gadgil Mukherjee formula, Sardinha has once again demanded at the inter-state council meeting that the loan grant ratio be upgraded to 50 : 50 from the existing one of 70 : 30, failing which small states like Goa would suffer due to limited source of revenue generation.

Goa is one of the states which had not blindly accepted the proposal of uniform tax policy and had appointed a cabinet committee to study the proposal thoroughly. Based on this, Sardinha had announced tax concessions to several items while presenting the budget in March.

Information Technology was one such sector where Sardinha had imposed no tax, stating that "it shall initiate Goa's journey on the information superhighway and hopefully without speedbreakers". The four per cent tax is a must now, breaking the speed while the state is far behind many other big states in the field.

While the tourist state was also known for having lowest sales tax of four per cent on motor vehicles in the country, it was increased by mere two per cent in the recent budget. But in order not to compete with neighbouring states, doubling the rate appears inevitable.

It could bring down the estimated revenue generation of Rs 390 crore – over 70 per cent of total generation – as the major market of the local vehicle dealers was in the neighbouring districts of Karnataka and Maharashtra.

Though the state treasury may benefit from increase in tax on country liquor from 8 to 20 per cent as the 'stuff' is purely a local speciality at a much cheaper price, the state government is still in a quandary over tax-free domestic cooking gas as it would be still more costlier by 8 per cent.

Besides increasing tax bracket from 8 to 12 per cent on soft drinks and soap and two to four per cent on non-ferrous metals, sulphur, zinc as well as printing ink, the state is now compelled to bring all the zero per cent items under 8 per cent category including coconuts, local biscuits, bread, toasts, cakes and pastries, school stationary items, fish twines, cane handicraft, earthenware and even hand-made utensils.

In spite of this, disclose finance department sources, the state government is considering a possibility of providing a cushion to locally made items, but only for local consumption and not for its exports.


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