The Hindu : CM insistence on Central commitment a surprise

Online edition of India's National Newspaper
Thursday, May 01, 2003

Southern States

Southern States - Tamil Nadu

CM insistence on Central commitment a surprise

By T. Ramakrishnan

CHENNAI, APRIL 30. The Chief Minister's announcement today that the value-added tax would not be introduced without a commitment by the Centre to compensate revenue loss, has come as a surprise to many, as the State has been making hectic preparations for introducing the new tax regime.

In recent weeks, Tamil Nadu's official stand has been in favour of enforcement of the new system, though the issue of revenue loss (likely to arise on account of VAT), which the Chief Minister and the Finance Minister raised in the House, is nothing new. The State budget presented on March 21, acknowledging this factor, noted: "On the insistence of all States including Tamil Nadu, the Government of India has come forward to compensate the revenue loss at 100 per cent in the first year, 75 per cent in the second year and 50 per cent in the third year".

Still, Tamil Nadu and 15 others agreed, early this month, to introduce VAT by June 1. This took place at a meeting of the empowered committee of the State Finance Ministers on April 8, after many States had given the go-by to the April 1 deadline.

Even the Commercial Taxes department's policy note, placed on the floor of the House on Wednesday, said the Tamil Nadu VAT Bill 2003 would be introduced and considered in the current session. "The Government of India also communicated the approval of the President on March 24, 2003 for introduction of the Bill", the document said.

As part of the preparatory work, the text of the Bill was put on the Commercial Taxes department web site last month. The Finance Minister, C. Ponnaiyan, had also said in his Budget speech "the draft VAT rules are under preparation and will be released on the departmental web site shortly".

Besides, the department undertook 100 per cent computerisation, involving online connectivity from checkposts to the office of the Commercial Taxes Commissioner.

Training programmes were arranged for both the departmental staff and industry and trade at various locations, the Finance Minister pointed out.

However, it is said the Union Finance Minister's observations in the Lok Sabha last week, hinting at a further postponement, could also have contributed to the latest position of the State Government. And today, the Union Finance Minister made it clear that unless all States joined the system and adopted the VAT legislation, it could not be introduced.

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