Financial Daily from THE HINDU group of publications
Wednesday, Feb 09, 2005
Financial Daily from THE HINDU group of publications Wednesday, Feb 09, 2005 |
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Industry & Economy
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Taxation VAT panel seeks removal of CST waiver on inter-State purchases K.R. Srivats
New Delhi , Feb. 8 THE Budget for 2005-06 may see some amendments to the Central Sales Tax Act to make this law consistent with the proposed design of State-level value added tax (VAT). States have already forwarded a bunch of proposals for this purpose to the Union Finance Ministry for the latter's consideration. The State-level VAT is to be introduced from April 1. The States are now collecting nearly Rs 15,000 crore every year from the CST. As part of its recommendations for changes to the CST Act, the Empowered Committee of the State Finance Ministers on VAT has urged the Finance Minister, Mr P. Chidambaram, to do away with the exemption on CST currently enjoyed by the Government departments on their inter-State purchases. "Government departments currently do not pay CST on their inter-State purchases. We have recommended that this exemption should go in a VAT regime", Mr Ramesh Chandra, Member-Secretary, Empowered Committee of State Finance Ministers on VAT, told Business Line here. He highlighted that the removal of exemption could bring down the scope for frauds in such purchases. Further, the Empowered Committee has also made recommendations on aspects such as assessments and simplification of forms etc., under the CST Act. Currently, there are no provisions for assessment under the CST Act. Under the proposed VAT regime, VAT liability would be self-assessed by the dealers themselves in terms of submission of returns upon setting off the tax credit. Even while indicating that the CST rate may get pruned to 2 per cent from April 1, 2006, Mr Chandra held that it would not be appropriate to come to any conclusion that the CST would get eventually phased out. "We (empowered committee) are now getting advice from countries such as Brazil, Canada and Australia that for a federal system like ours, it may be appropriate to continue with the CST for tracking inter-State transactions," he said.
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