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Delhi rolls back VAT on clothes, hybrid vehicles

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In it’s second Budget, the Aam Aadmi Party in Delhi has proposed to rationalise taxes by reducing the Value Added Tax (). Now, several items like sweetmeats and namkeens, high-end watches, readymade garments and footwear, and hybrid and battery-operated vehicles will be available at cheaper rates in Delhi.

Govt rolls back VAT on textiles, footwear
Sisodia explained that the idea had been to keep the VAT rate in sync with levels prevailing in the neighbouring states

The government has proposed to reduce the tax rate on sweetmeats and namkeens to 5 per cent from the current 12.5 per cent. The same will be done for readymade garments up to Rs 5,000 were being taxed at 5 per cent, while those priced above  Rs 5,000 were taxed at 12.5 per cent.

The watches segment too is currently subject to differential tax rates of 12.5 per cent and 20 per cent, based on their prices. The Delhi government has now proposed that a uniform VAT rate of 12.5 per cent will be levied on all kinds of watches.

Similarly, it has been proposed to levy a uniform VAT rate of 5 per cent on footwear, irrespective of their prices. Tax rate on school bags has also been rationalised by levying a uniform tax rate of 5 per cent. Earlier, a higher tax rate was levied on school bags priced above Rs 300.

To encourage use of environment-friendly vehicles, the state government has reduced VAT rate on battery-operated vehicles such as e-rickshaws and hybrid automobiles to 5 per cent from the current 12.5 per cent.

Marble traders too got relief with the proposal of reduction in tax rate from 12.5 per cent to 5 per cent, which the government believes will encourage consumers to buy marble from the capital instead of neighbouring States.

Announcing the withdrawal, Deputy Chief Minister of Delhi Manish Sisodia was quoted by The Economic Times as saying: “We are not embarrassed about taking this U-turn if it benefits the people. We won’t wait for the poor to start committing suicide, for people to die, for students to start committing suicides before we reverse a policy. The AAP government is here to serve the people, not to massage our ego.”

According to The Economic Times: Sisodia explained that the idea had been to keep the VAT rate in sync with levels prevailing in the neighbouring states. However, it was now felt that by levying a 5 per cent VAT on hitherto exempted textiles, business would move to Haryana and Uttar Pradesh.