J&K government imposes VAT on IT products

Finance minister Haseeb Drabu presenting the budget estimated the total public expenditure at Rs 46,473 crore. He announced to remove 0% VAT benefit on IT products and imposed 5% VAT on computer and its peripherals from March 31.

The step initiated by finance minister created happiness amongst partner’s residing in neighboring states like Punjab etc.  Earlier 0% VAT benefit was provided to promote use of information technology products such as computers, UPS’s etc. As of now, this incentive does not exist in most of neighboring states of the country. The main motto of incentive was to support and uplift verticals like schools, wellness centers, sports clubs, etc. Further, this incentive does not seem to have percolated to the intended beneficiaries as these goods are not available at cheaper rates in the state.

In fact, it has resulted in unethical practices of IT products which gave rise to predatory pricing and heavy dropdown in IT market in nearby states. Based on same Drabu said, “I propose levy of 5% VAT on computers and computer peripherals which is likely to garner resources to the tune of Rs 10 crore.”

Relieved partners were anxiously waiting for something good to happen.

Presently, the inverters are taxed at 13.5% and computer including other peripherals at 5% VAT. “I propose to remove dichotomy by applying a uniform tax rate of VAT of 13.5% on both as there is possibility of misclassification,” added finance minister Drabu.

Partners of nearby states are now seeking for business to come on track.