Revenue drop fires VAT rethink

In an unusual move that has attracted some criticism, India’s Uttar Pradesh state government has slashed the VAT on cigarettes and cigars from 50 percent to 25 percent.

According to a report in the latest issue of the BBM Bommidala Group newsletter, the decision to reduce VAT was taken at a meeting of the state cabinet, which is hoping to halt the loss in revenue that followed an increase in VAT last year.

The level of VAT levied on cigarettes and cigars was increased in 2012 from 12.5 percent to 50 percent.