VAT panel may allow flexibility in rates

Special Correspondent

NEW DELHI: In a bid to strike a balance on VAT (value added tax) rates, the empowered committee of state finance ministers on VAT has decided to allow flexibility in rates on some items while ensuring uniformity in tax rates of most items. The VAT panel will hold another meeting on April 25 and 26 to resolve this issue of variation in rates as well as the unjustified rise in prices of some products.

Disclosing this here on Saturday after a four-hour long meeting of state finance ministers, the committee Chairman, West Bengal Finance Minister, Asim Dasgupta, told newspersons that he would be visiting the eight states which have not implemented VAT and urge them to join the rest of the country. He said 21 states had already introduced VAT but these eight which had not done so might be in the final stages.

On the problems of variations in VAT rates as well as the rise in prices, he said that these issues would be resolved this month. He noted that introducing a new tax system was bound to have teething problems but these could be settled by striking a balance between uniformity and flexibility in the VAT rates. He felt there was need for a reasonable federal flexibility on the variation in rates, though the basic feature of VAT was common. He conceded it was not an easy job but it would be done.

The issue has arisen because several states like Delhi have already altered the VAT slab rates for some items and placed nearly 14 categories items under the exempted list. Under the VAT regime, there are supposed to be three slabs — nil for the exempted category, 4 per cent and 12.5 per cent.

As for petroleum products, however, he clarified that these would continue to remain out of VAT since prices were not determined by the market but by an administered pricing mechanism, he said. Mr. Dasgupta said the committee would also look into the issue of price rise which was not justified under the VAT regime in some commodities. Complaints against large manufacturers who had not passed on VAT benefits would be studied. In addition, he said the committee would seek to resolve the differences between states on the issue of minimum floor tax rate on diesel and other petroleum products. Some states had reduced the tax on diesel from the 20 per cent floor rate laid down by the committee.

The list of items under VAT would not be extended but there could categorisation of different items under one head, he said. Referring to the proposal for another slab rate of eight per cent raised by some states, he said this issue would be discussed at an appropriate time.

The Uttar Pradesh Agriculture Minister, Ashok Bajpai, said it could take some time for the state to switch over to the new regime since traders will have to agree to it initially.

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