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India:Majority of states ready for VAT, textile excluded from the net |
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2004-11-4
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 Excepting for Uttar Pradesh and two other states, 26 states have agreed with the Centre on Tuesday on a 3-tier system of compensating the states that incur revenue loss due to of implemention of the Value-Added Tax (VAT) scheme from April 2005.
All necessary legislations were in place said the Government.
P Chidambaram, Finance Minister while announcing the package said, "I am very happy to report that the empowered committee on VAT has taken some major decisions, including compensation package for states for any loss of revenue (after VAT introduction)."
However, the 4.0 per cent Central Sales Tax would continue in the first year (2005-06), but eventually it would be phased out, for which a timeframe would be worked out by the VAT panel.
"But there would be no change in CST in 2005-06," he said, adding vat panel would work out a timeframe for CST phase-out.
Chidambaram said that the 3-tier package would give 100 per cent compensation for revenue loss in the first year, 75 per cent in the second year and 50 per cent in the third year.
He expressed his happiness at the states'' preparedness for implementing VAT legislations.
"Only three states are yet to finalise the legislation which included Uttar Pradesh," he said.
Chidambaram and VAT panel chairman Asim Dasgupta would visit Lucknow on November 11 to discuss with the UP government the issues that are impeding the progress on VAT.
"We will discuss with UP Chief Minister Mulayam Singh Yadav and sort out the issue," Dasgupta said.
It is believed that Manipur and Nagaland have yet to finalise their VAT bills, though Chidambaram and Dasgupta did not name those states.
Dasgupta said major decisions were taken on Tuesday "as we finalise the compensation package for possible revenue loss".
"Twenty six states are now ready with the VAT bills as against 16 when the VAT panel last met two months ago," he said, adding by December the President''s assent for the bills was likely to be obtained and by January the legislations would be in place.
The Centre would continue to collect Special Additional Duties (SAD) on three items - sugar, tobacco and textiles - and share it with the states in the next fiscal.
"There would be no change in SAD and CST on these items for 2005-06," Chidambaram said.
States have finalised the VAT rates for about 500 items with 250 essential commodities - agro products, medicine, manufacturing inputs slated to attract a 4 per cent, while 217 other items would attract 12.5 per cent tax.
About 41 items like petrol, diesel, ATF, agriculture equipment and newspapers would be exempt from VAT while precious metals like gold and silver would attract only 1per cent tax. Sugar, textile and tobacco items would be out of the VAT net but attract SAD.
A national campaign for VAT implementation and awareness would be launched in the first week of December for which a white paper would be prepared, he addded. |
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