VAT Fuels Revenue Collection

Increasing population and rising consumerism has been contributing substantially to the state's coffer.

According to the finance ministry, among all the taxes Value Added Tax (VAT) will cover almost one-third of the total revenue. Out of the total revenue target of Rs 176.50 billion for the fiscal year 2009-10, the ministry is targetting Rs 51.56 billion revenue from VAT only.

"It is but obivious, if one follows the trend since last few years," said former finance minister and CPN-UML stalwart Bharat Mohan Adhikari.

"The rising consumerism has fuelled the trading pushing the VAT revenue up every year," he said attributing the growth of revenue to VAT that is a consumption tax levied on any value that is added to a product.

In the first month of the current fiscal year (July 16- August 16), the VAT has contributed Rs Rs 4.34 billion in the total revenue collection of Rs 11.74 billion. The revenue target for the first month was only Rs 9.78 billion but the ministry exceeded the target because the VAT and excise duty collection exceeded their target.

The VAT target for the first month was Rs 4.33 billion but the collection exceeded the target as the ministry collected Rs 4.34 billion. Similarly, the excise duty collection target for the first month was Rs 1.03 billion but the collection exceeded and it posted Rs 1.63 billion collection.

According to the finance ministry target, the collection from customs would be Rs 33.12 billion and that from excise duty Rs 19.64 billion.

The trend of over collection of VAT, customs and excise duty not only indicate the rising consumerism but also the reforms in the customs valuation and administration.

"The finance ministry would easily meet its revenue target," Adhikari said adding that the growth trend has been encouraging.

According to the ministry's target, it has also planned to collect Rs 26.25 billion in nontax revenue.

However, the substantially amount of the collected revenue is spent on administrative costs. The development expenses plunged to the lowest level in the last fiscal year due to lack of any development activities in absence of the local bodies. This year too, the story might repeat itself as development activities has not yet started.

"Without any development activities, the government would be spending on nonbudgetary expenses," said a senior economist.

"The Maoist-led government also failed on excelerating development activities and the current CPN-UML-led government is also delaying in starting any development projects that will ultimately lead to misuse of state's coffer," he said adding that the revenue would be spent on unproductive areas leading to mismanagement of state-coffer.