Today's Paper

21 States to implement VAT from April 1

NEW DELHI, MARCH 24. The cloud of uncertainty hanging over the implementation of the Value Added Tax (VAT) has cleared with 21 States giving their commitment to switch over to the new tax regime from April 1. Efforts are on to ensure that other "reluctant" States also join the bandwagon.

The road for "timely" implementation of the "historic" new levy in lieu of the sales tax was paved only after some more major reliefs and assurances were announced at the meeting of the Empowered Committee of State Finance Ministers on VAT, convened here on Thursday by the West Bengal Finance Minister, Asim Dasgupta. The Union Finance Minister, P. Chidambaram, also attended the meeting.

Further cut in tax rate

The Empowered Committee decided to cut the tax rate further from one per cent to 0.25 per cent and double the exemption limit for small traders from Rs. 5 lakhs to Rs. 10 lakhs. Mr. Chidambaram assured the Ministers that while the Central Sales Tax (CST) would be phased out in three years, any revenue loss incurred by the States following the switchover would also be compensated.

As a measure of further comfort to assuage the misgivings of various States and traders' associations, the empowered panel also agreed to "review" the VAT slab rates on a number of items after June this year.

Following today's positive outcome, the empowered panel has renewed efforts to open up fresh channels of communication with Uttar Pradesh, Uttaranchal, Tamil Nadu and the five BJP-ruled States — Rajasthan, Gujarat, Madhya Pradesh, Chattisgarh and Jharkhand — to persuade them to switch over to the VAT regime.For instance, at the VAT panel meeting, while Mr. Chidambaram urged the States to add a new dimension to Centre-State ties by switching over to the new regime, Mr. Dasgupta, in his capacity as the panel Chairman, met senior BJP leaders, L.K. Advani and Yashwant Sinha, during the day urging them to "reconsider" their decision.

In the next few days, the VAT panel will also meet the Uttar Pradesh Chief Minister, Mulayam Singh Yadav, as also the Finance Minister of Tamil Nadu, besides having further discussions with the BJP leaders to make them fall in line with the rest of the country.At the VAT panel meeting, Mr. Chidambaram referred to Mr. Dasgupta having obtained a commitment from 21 States on implementation of the new tax regime and said: "It is a historic opportunity for States to add a new dimension in the Centre-State relationships where an Empowered Committee is really setting the agenda".

Making a fervent appeal to the Ministers, he said: "VAT is your law, it is your tax... and you have taken a decision to implement VAT from April. I am confident that a vast majority of States will implement VAT. I urge the State Finance Ministers not to miss this opportunity but to continue with the roadmap drawn by them." Today's meeting of the VAT panel was the 89th since the committee's inception in 2001, all in an effort to finalise and fine-tune the modalities for switching over to a more transparent tax system sought to be put in place so as to curb the cascading effect of the existing multiple taxes while augmenting the revenue of States.

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