The Hindu Business Line : VAT: States given option on rice, grains for 1 year

STATES have now been given an option to keep rice and other foodgrains out of the value-added tax (VAT) net instead of at 4 per cent as originally proposed, when the new tax system replacing sales tax comes into force from April 1.

But the new option would, however, be available to the States only for the first year of VAT implementation after which this decision would be reviewed, the Chairman of the Empowered Committee of State Finance Ministers on VAT, Dr Asim Dasgupta, said here today.

Some of the southern States had represented to the VAT panel that the committee should review its earlier decision of placing rice and foodgrains under the 4-per cent VAT rate.

Option on tea

"A consensus view emerged at today's empowered committee meeting that States be given an option of keeping rice and foodgrains in the exempted category. A similar option has also been given for tea and the States can now choose either 12.5 per cent or 4 per cent as VAT rate," Dr Asim Dasgupta told reporters here.

He said the tea growing States had expressed genuine difficulties in levying a VAT rate of 12.5 per cent. Dr Dasgupta also said the option to levy 4 per cent VAT rate on tea would be available only for the first year of VAT implementation after which this decision too would be reviewed by the Empowered Committee.

550 goods covered

The White Paper on State-level VAT, released by the Union Finance Minister, Mr P. Chidambaram, here today, specifies that the proposed VAT system would cover about 550 goods. The paper highlighted that there would be only two basic VAT rates of 4 per cent and 12.5 per cent, plus a specific category of tax-exempted goods and a special VAT rate of 1 per cent only for gold and silver ornaments, etc.

Dr Dasgupta said the exempted category would have about 46 commodities comprising natural and unprocessed products in unorganised sector, items that are legally barred from taxation and items that have social implications.

Included in this exempted category is a set of maximum of 10 commodities flexibly chosen by individual States from a list of goods (finalised by the Empowered Committee) that are of local social importance for the individual States without having any inter-State implication. The rest of the commodities in the list will be common for all the States.

About 270 goods, common for all the States, would come under 4 per cent VAT category. These include items of basic necessities such as medicines and drugs, all agricultural and industrial inputs, capital goods and declared goods.

The remaining commodities, common for all the States, will fall under the general VAT rate of 12.5 per cent.

On account of initial organisational difficulties, VAT on Additional Excise Duty items (sugar, textile and tobacco) would not be imposed for one year after the introduction of VAT and till then the existing arrangement would continue.

Dr Dasgupta also told reporters that the schedule of commodities would be attached to the VAT Bill of every State.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
BG to invest $250 m more in Panna-Mukta, Tapti oilfields

ICICI Bank net rises 18 pc in third quarter

Readymade garment exports up

VAT: States given option on rice, grains for 1 year

Sensex gains 20 pts on a day of sudden swings

Roadmap for FDI in private banks — Doubts over annual creeping acquisition proposal

ICICI Bank: In line with expectations

UTI Bank plans GDR listing in March

Separate content regulator likely for TV

When tsunami struck, they had no cover

Contributions to The Hindu Relief Fund