The Hindu Business Line : VAT on course from April 1; more sops for traders on cards

The Chairman of the Empowered Committee on VAT and West Bengal Finance Minister, Dr Asim Dasgupta (second from right), with the Finance Ministers of Punjab, Madhya Pradesh, Rajasthan and Delhi at a meeting on VAT in the Capital on Monday.

New Delhi , March 7

THE State-level value-added tax (VAT) regime would take off across the country from April 1, irrespective of whether Uttar Pradesh and a few other "recalcitrant" States come on board or not.

Fresh sweeteners are also now being put in place by the VAT panel to assuage trading community concerns over the implementation of the new taxation system.

"All States shall implement VAT from April 1. Make no mistake about it. VAT will not be deferred, irrespective of whether Uttar Pradesh joins or not," the Chairman of the Empowered Committee of State Finance Ministers on VAT, Dr Asim Dasgupta, told newspersons here today.

Dr Dasgupta however held that the VAT panel was in the midst of discussions with officials in the U.P. Government to sort out residual ground level problems. "But in any case, we are going ahead with VAT from the coming fiscal," he said.

According to officials, as many as six States — Karnataka, Andhra Pradesh, Kerala, Delhi, Orissa and Assam — have explicitly declared their intention to introduce VAT from April 1, whether or not their neighbours follow suit. A number of other States have also passed VAT legislation in their respective Assemblies.

"There are some like Jharkhand who have not been able to enact VAT laws because of the Assembly being dissolved due to elections, though the previous government under Mr Arjun Munda had already approved the Bill," the officials said.

The real problem States, they added, were U.P. and Tamil Nadu. U.P. apparently is seeking additional sops such as introduction of a new VAT rate of 8 per cent, besides the proposed rates of zero, one, four and 12.5 per cent.

As far as Tamil Nadu is concerned, the Finance Minister, Mr P. Chidambaram, is expected to soon discuss the pending issues with the Chief Minister, Ms J. Jayalalithaa. Tamil Nadu is yet to notify the VAT legislation. Other States such as Rajasthan and Madhya Pradesh are said to be demanding a clear roadmap for phasing out the Central sales tax (CST), including a separate package for compensating the revenue losses on this count.

Dr Dasgupta said that at the meeting of the empowered committee today, a few decisions were taken to make VAT more trade and trader-friendly.

First of all, penal provisions contained in the VAT laws would not be invoked during the first six months after VAT implementation. Secondly, while VAT was based on self-assessment by traders, no revenue official would be allowed to visit the premises of traders unless written permission was obtained from the concerned commissioner of commercial taxes.

Finally, it has also been decided to modify the composition scheme, which allows small dealers with annual turnover not exceeding Rs 50 lakh, who are otherwise liable to pay VAT, to instead opt for paying tax as a small percentage of turnover.

"Till now, we had stipulated the percentage in terms of gross turnover, which is being modified to net turnover after excluding turnover from exempted items such as foodgrains," Dr Dasgupta said.

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