FNB News - Maharashtra government hikes value added tax in two slabs by 0.5 and 1%

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Maharashtra government hikes value added tax in two slabs by 0.5 and 1%

Tuesday, 20 September, 2016, 08 : 00 AM [IST]

Pushkar Oak, Mumbai

The Maharashtra government raised the standard value added tax (VAT) in two different slabs with effect from September 17, 2016. Goods which were charged 12.5 per cent VAT will now be charged one per cent more VAT (i.e. 13.5 per cent), while those which were charged 5.5 per cent will now be charged 0.5 per cent more VAT (i.e. six per cent).

Tatyasaheb Dagdu Hule, chairman, Agricultural Produce Market Committee (APMC), Patoda, Beed indicated that a fall in farmer's business would be witnessed as procurements will also fall.

“Due to the hike in VAT rates, the fruit and vegetable business will be low for a short span as the region has the majority of fruit and vegetable processing companies located in the area,” he added.

Goods like milk powder. masalas, sweets, farsan, spices and processed fruits and vegetables would be affected with the 0.5 per cent rise in VAT as they fall under the 5.5 per cent segment. However, milk and sugar are exempted.

On one hand, frozen food exporters will be affected by this hike. On the other, agricultural equipment, meat, fish, food grains like rice, wheat, jowar, vegetables, fruits, raisins, chillies, turmeric and coconut, which were given tax concessions earlier, will continue to get their concessions and be exempted.

Namkeen (farsan) manufacturers are worried as Navratri and Diwali are approaching. The festive season accounts for more than 10 per cent of their sale.

Jiten Gosalia, proprietor, Babubhai Namkeen, said, “We were happy that the season has started, but are disappointed with the recent decision, as it would affect players like us. The government should not have altered the policy till there was clarity on GST.”

“To make matters worse, the change in the policy also means that we will have to incur a higher expenditure on the supply chain, as the transportation costs will increase. We will have to bear these added expenses till GST rolls out,” he added.

Prashant Bumb, member of legislative assembly and promoter of cluster development projects, said, “The rise in VAT will affect these cluster projects as 80 per cent of these clusters process fruits and vegetables for established players. We are seeking a consideration from the government as it may affect their business.”

He added, “Last year, the state government raised VAT to cope with the drought. It included aerated drinks, liquor and petrol and diesel. This is the second consecutive hike.”

Sharad Shetty, president, Hotels and Restaurant Association, Pune, said, “It will not have an adverse impact on hotels and restaurants, but small eateries and food processing facilities will definitely be affected. Players like us will only face issues with regards to masalas and milk powder.”