Hike in prices of Tobacco products in UP

Lucknow, May 24 (UNI) A hike in the prices of tobacco products in Uttar Pradesh is on the cards following the Uttar Pradesh government's decision to impose a 32.5 per cent trade tax on all tobacco products except smoke beedi.

The decision taken today at the state cabinet meeting chaired by Chief Minister Mayawati is likely to generate a revenue of Rs 625 crore annually from the hike.

However the new tax slab on beedi would be 12.5 per cent.

The trade tax on beedi and other tobacco products has been imposed to compensate for the loss to the state exchequer on account of abolition of the Central Sales Tax (CST) on beedi and tobacco from April 1, this year. UP was getting Rs 250-300 crore per year from the CST.

The Centre abolished the CST from April 1, as many state governments have implemented the VAT in their respective state and UP was yet to implement the new tax regime.

The empowered committee on VAT headed by the West Bengal Finance Minister in April last had allowed UP to impose trade tax on beedi and tobacco products to compensate for the losses arising out of the abolition of the CST. Earlier the CST at the rate of one per cent was imposed on beedi and tobacco products.

Official sources said here that the decision to impose trade tax has been delayed as the state was under the spell of Model Code of Conduct for three months due to the assembly election. The election process was completed on May 11 and new government was installed on May 13.

In another decision the cabinet approved the compounding scheme in place of trade tax for the brick klin owners. The compounding fee has been hiked by 20 per cent for the current fiscal 2007-08 as compared to the last fiscal 2006-07.

The official spokesman said if the brick klin were willing to pay the increased compounding fee then there would be no inspection of their kilns by the tax authorities. The spokesman said it was a win win situation for both the parties, the klin owners and the state government both stand to gain. The hike in compounding fee would fetch an additional revenue of Rs 48 crore to the exchequer.

UNI