Odisha Assembly

Bhubaneswar, Feb. 25: The Odisha government today drew flak from the Opposition for hiking the value added tax (VAT) on medicines and other essential commodities by one per cent.

The Opposition members in the Odisha Assembly alleged that the government had been forced to enhance the VAT from four per cent to five per cent under the pressure of the business community as the latter had helped the ruling party during the last panchayat poll.

However, finance minister Prafulla Ghadai denied the allegations and said increasing the VAT became a compulsion after the Centre reduced the central sales tax (CST) from four per cent to two per cent.

“Because of this move of the Centre, Odisha was losing nearly Rs 700 crore per annum,” he said.

Initiating an adjournment motion in the Assembly on the issue, Opposition chief whip Prasad Harichandan said the government was trying to mislead the people on VAT. “When the Centre had reduced the CST to two per cent from four per cent in 2007-08, Odisha did not hike the VAT at the time. However, everyone wants to know what prompted the state government to hike the VAT at this moment,” he said, adding that the information on the VAT was leaked by the government prior to the placement of the budget on the floor of the Assembly on Friday. The revised VAT will come into effect from April 1, 2012.

The government announced to hike the VAT from four per cent to five per cent in 136 products, including medicine and other essential commodities. This tax hike has drawn sharp criticism across Odisha as the government announced the VAT just after the completion of the panchayat poll.

Targeting the government on allowing captive power plants to enjoy the tax cut-off to a whopping Rs 14 crore, Harichandan said the industrial houses also enjoyed tax benefit as the water-cess had not been increased. “If the Odisha Mining Corporation would have regulated the mining operation, Odisha could have generated a revenue of more than Rs 50,000,” he said.

On the other hand, Congress MLA Naba Das said as the BJD had taken a heavy amount as donation from the business group for poll campaigns, the government had no option left but to enhance the VAT.

“An attempt has been made by the government to woo the business community,” he said. Opposition leader Bhupinder Singh said it would have been better had the government initiated steps to check the pilferage of tax rather increasing the VAT. Replying to the adjournment motion, Ghadai said: “The enhanced VAT will not affect the common man as the tax will not be imposed on the retail points.”