Date:31/01/2005 URL: http://www.thehindu.com/2005/01/31/stories/2005013106990400.htm

Karnataka

State can withdraw from VAT: Siddaramaiah

By Our Staff Correspondent

MYSORE, JAN. 30. The State Government reserves the right to withdraw from the Value Added Tax system if the proposed taxation regime harms the interests of farmers, the middle class and the poor, the Deputy Chief Minister, Siddaramaiah, has said.

Speaking to presspersons here today, Mr. Siddaramaiah, who also holds the Finance portfolio, said that VAT, which will come into force from April 1 all over the country, is not constitutionally binding on the State Government.

Mr. Siddaramaiah feared that the State Government will incur a loss of Rs. 2,000 crores in its annual revenue if VAT is implemented.

However, the Centre has promised to make good the loss to an extent of 100 per cent in the first year, 75 per cent and 50 per cent in the second year and third year respectively. However, in the same breath Mr. Siddaramaiah said VAT is acclaimed internationally as a simplified taxation procedure. "VAT will be helpful to taxpayers as multiple taxation can be avoided," he said.

Contention disputed

He disputed the contention that VAT has been implemented in the wake of India's adherence to General Agreement on Tariffs and Trade (GATT) and World Trade Organisation (WTO). VAT was in vogue in several countries even before GATT and WTO became part of the new world order.

Mr. Siddaramaiah said an estimated 550 products will be covered under VAT in the State. A committee of State Finance Ministers has been constituted to work out the modalities for making VAT people-friendly.

The Janata Dal (S) leader refused to be drawn into a discussion on the demand from a section of the Congress leadership in the State to come out of the coalition and retain its identity. The Deputy Chief Minister declined to comment on the issue, as it is an internal matter of the Congress.