Industry & Economy
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Taxation
Higher VAT exemption cap may mean lower Central compensation
K.R. Srivats
New Delhi
,
March 10
STATES opting for a value-added tax (VAT) exemption limit beyond Rs 5 lakh may not get any additional compensation from the Centre on this ground for any possible revenue loss.
Such States may have to absorb the additional losses, if any, arising from any decision to have an exemption limit higher than the earlier agreed Rs 5 lakh, informed sources said.
While the turnover ceiling for VAT exemption had been pegged at Rs 5 lakh in the White paper, States have now been granted the leeway to exempt dealers with gross annual turnover of up to Rs 10 lakh from coming under the VAT net. The changed position on the exemption limit has a bearing on the compensation that may be payable to the States by the Centre for possible revenue losses on VAT implementation.
States now have the flexibility to fix the threshold limit within Rs 10 lakh. At least three States (Uttar Pradesh, Delhi and Kerala) are keen to peg their exemption limits at a level above the earlier specified limit of Rs 5 lakh.
The Empowered Committee recently took a number of steps, including a freeze on imposition of penalties in the first six months of VAT introduction, to placate the agitating trading community.
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