The Hindu Business Line : 20 States migrate to VAT amid traders' protest

UNFAZED over the three-day nationwide agitation against value added tax (VAT), 20 States and major Union Territories such as Delhi and Pondicherry migrated to a VAT regime on Friday.

Eight States are yet to come on board for implementing the VAT regime.

The Empowered Committee of State Finance Ministers on VAT had set April 1 as the appointed date for all States to switchover to the new regime.

The State-level VAT system, being dubbed as the most important tax reform ever attempted in the country, seeks to eliminate the cascading effect of sales tax. VAT has now been introduced in majority of the States after a prolonged effort and number of postponements in the implementation date.

"We have 20 States plus major Union Territories like Delhi and Pondicherry that have migrated to VAT as of today," Mr Ramesh Chandra, Member-Secretary of the Empowered Committee of State Finance Ministers on VAT, told Business Line here on Friday.

The Empowered Committee has taken Delhi as a Union Territory.

While a majority of States conformed to the April 1 deadline set by the Empowered Committee, eight States including the five Bharatiya Janata Party (BJP) ruled States of Gujarat, Madhya Pradesh, Rajasthan, Jharkhand and Chhattisgarh have not so far come on board.

The other States that have not switched to VAT regime as of April 1 are Tamil Nadu (ruled by the AIADMK), Uttar Pradesh (ruled by the Samajwadi Party) and Uttaranchal.

The three-day trade bandh, which had been called by traders' associations with close affiliation with the BJP, evoked a mixed response.

While the trade bandh crippled the functioning of wholesale markets in most parts of the country, the impact at the retailers' level was however less than severe.

The BJP had on March 19 announced that States ruled by it would not implement VAT unless the new tax system was "uniformly implemented" in all States at one go. BJP leaders held that piecemeal implementation of VAT was undesirable.

The Chief Ministers of BJP-ruled States also demanded a clear roadmap for phase-out of the Central Sales Tax (CST).

As per the VAT design, CST would continue to exist in the first year of VAT implementation (2005-06). CST collections exceed Rs 15,000 crore in a year.

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