12 States to keep VAT deadline

By Our Special Correspondent

NEW DELHI, NOV. 23. The April 1, 2002 deadline for implementing Value Added Tax (VAT) will be kept by 12 States, though there is unanimity among all States to switch over to the new taxation system. The rates for the VAT would be in the 4 to 10 per cent range.

The Union Finance Minister, Mr. Yashwant Sinha, told presspersons after a meeting with the Empowered Committee of State Finance Ministers here today that ``there was complete unanimity among States. Most of them will be in a position to implement it from April 2002. I have given them the assurance that if any State incurs loss in revenue while implementing VAT, the Centre will compensate them for the loss".

But only 12 States, including the three newly-formed States, are in a position to implement it from April 1 next year while the remaining States would implement it from 2003.

The Empowered Committee, headed by the West Bengal Finance Minister, Dr. Ashim Dasgupta, also finalised the rates of VAT, which would replace the existing sales tax system. Unprocessed agricultural and industrial goods in the unorganised sector and goods of social importance would be exempted from VAT, Dr. Dasgupta said.

A uniform 4 per cent rate would be applicable for goods of basic necessity, industrial and agricultural inputs, capital goods and those under the additional excise duties scheme. The committee decided to peg a one per cent VAT on gold, silver, precious and semi-precious stones and a 20 per cent floor rate on liquor.

A 10 per cent general floor rate would be applicable to other commodities. VAT would not apply to unprocessed agricultural and industrial goods in the organised sector.

Dr. Dasgupta also said a committee to work out a formula for sharing of powers between the Centre and the States on the issue of taxation of services had been formed. The committee, headed by Mr. G. C Srivastava, Additional Secretary in the Department of Revenue, would submit its recommendations in 15 days.

States would also be allowed to impose VAT on textiles, sugar and tobacco, on which additional excise duties are already imposed, he added.

Meanwhile, some chambers of commerce and industry have expressed concern that some States were planning to impose some other forms of taxation like entry tax, luxury tax, and special additional tax on select products. Such measures would eventually render the entire VAT system futile, the chambers told the Empowered Committee.

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Section  : Business
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