Sisodia blames demonetisation for VAT collection dip

THE DELHI government’s Value Added Tax (VAT) collections fell by 3 per cent in December 2016 as compared to the same month in 2015. Deputy Chief Minister Manish Sisodia, who also holds the trade and taxes portfolio, said this was because of the Centre’s demonetisation announcement on November 8.

“What other factor could have caused it? It is because of demonetisation. Businesses are down by 20-30 per cent. Traders have been hit badly,” he said.

According to the government’s record, the VAT department collected tax worth Rs 1,850 crore in November 2015. In 2016, the collection in November surged by 15 per cent to Rs 2,025 crore. However, the December collections fell from Rs 1,757 crore in 2015 to Rs 1,665 crore in 2016. Government sources said December has been the only month in 2016 in which growth was negative. “Tax collections are expected to dip further in January,” said Sisodia.

According to senior officials, there are a number of seasonal factors that affect VAT collections. “Businesses did well during Diwali as a result of which VAT collection was higher. We recorded a 15 per cent growth as compared to last November,” said a senior official.

Secretary general of the Confederation of All India Traders, Praveen Khandelwal, said, “It’s only natural that demonetisation will impact VAT collection. The currency flow was hit. Both the customer and the merchant did not have money. The period between October and February is considered ‘festival season’. Both business and tax collection usually surge. But in November, there was no cash flow because of which December collections have shown a dip. However, businesses are slowly picking up so I hope that the January collections will be better.”

Khandelwal said at least 50 per cent of the businesses continue to be affected by demonetisation and that it will take at least three more months for businesses to be restored to normal.

‘Traders have been hit’