Northern states, UTs decide to have uniform tax regime

Ravi S Singh & Ruchika M Khanna 
Tribune News Service

New Delhi/Chandigarh, May 21

Delhi and its neighbouring states Punjab, Haryana and Himachal Pradesh and UT Chandigarh today agreed to have a uniform tax structure.

The move, which means Value Added Tax (VAT) on all goods sold in these states will be same, will help curb tax evasion and smuggling of goods from a state imposing lower tax to the one imposing higher. For the purpose, a Zonal Economic Intelligence wing, headed by top excise and taxation commissioners in each state, will be formed.

A committee comprising officers from the Finance and Excise departments from all participating states has been formed to work on the uniform tax structure. The members will meet within next 10 days to discuss ways to plug loopholes in excise policies and reign in tax evasion.

At the high-level meeting held in Delhi, it has also been decided to seek tax cooperation from Jammu and Kashmir, Uttar Pradesh, Uttarakhand and Rajasthan.

Sources told The Tribune that the states were unanimous in having a uniform tax structure on petrol and diesel —major contributors to VAT — followed by imposing a similar “sin tax” on sale of tobacco products. “Sin tax” is a kind of sumptuary tax specifically levied on certain socially proscribed goods and services such as alcohol, tobacco, candies, soft drinks, fast food, coffee and gambling.

Difference in VAT, surcharge on VAT and cess imposed on fuel leads to variation in fuel price in different states. The state-imposed taxes on fuel are highest in Punjab, followed by Delhi, which leads to diversion of fuel sale to neighbouring states. “We can impose around 20 per cent VAT on fuel, but don’t do so for fear of diversion of sale to neighbouring states,” said a senior officer from Punjab.

Even in tobacco products, both Punjab and Rajasthan had to suffer and roll back “sin tax” (to curb its sale) in 2013-14 after other states refused to raise it. While sale of cigarettes and other tobacco-based items in these states dropped sharply, their smuggling from neighbouring states caused them heavy loss of revenue. Thereafter, they increased “sin tax” on tobacco to 50 per cent, which Punjab later rolled back to 22.5 per cent.

Sources say at a later stage, the uniform tax structure would also include imposing similar taxes on registration of vehicles to ensure the sale doesn’t shift to other states.

Among those present at the meeting were Delhi Chief Minister Arvind Kejriwal, Delhi Deputy Chief Minister Manish Sisodia, Punjab Deputy Chief Minister Sukhbir Singh Badal, Punjab Finance Minister Parminder Singh Dhindsa, Haryana Finance Minister Capt Abhimanyu and Himachal Pradesh Finance Minister Parkash Chaudhary.