The Hindu Business Line : VAT panel ratifies easier norms for compensation claims

The Chairman of the Empowered Committee of State Finance Ministers on VAT, Dr Asim Dasgupta, flanked by the Member Secretary of the committee, Mr Ramesh Chandra (left), and the Advisor to Finance Minister, Mr Parthasarathy Shome, at a meeting of the All State Finance Ministers' Conference on VAT at the Delhi Secretariat in the Capital on Saturday. - Kamal Narang

New Delhi , July 9

THE Empowered Committee of State Finance Ministers on VAT on Saturday ratified a simplified procedure that would expedite the processing of compensation claims made by the State Governments.

The main procedural relief for States is the removal of the requirement of State accountant-general certification for every claim made to the Centre. They can now make monthly claims without the certification. It was felt that insistence of certified claims would impact the cash flows of the States seeking compensation.

"States whose actual VAT rate growth are lesser than the projected trend rate of growth can approach the Union Government for compensation. The modalities of communication to the Centre was thrashed out today," Dr Asim Dasgupta, Chairman of the Empowered Committee, told newspersons after a meeting of the VAT panel.

He said the Finance Secretaries of the States that need compensation would meet during the first week of every month and send the "departmental actuals" to the Union Finance Ministry. The Finance Ministry would in turn release ad hoc amounts.

"We have been able to convince the Centre that the State accountant-general can certify the actuals on quarterly basis and adjustments can be done after reconciliation. The States have got a fair deal," Dr Dasgupta said.

The Advisor to the Finance Minister, Dr Parthasarathi Shome, was present at the meeting in which senior Union Finance Ministry officials also attended.

Maharashtra claims Rs 90 cr

MAHARASHTRA has claimed a compensation of Rs 90 crore from the Union Government for the revenue loss incurred by it in April on account of the VAT introduction.

Indications are that the cumulative compensation that would be claimed by the States for the first quarter (April-June 2005) could conservatively be around Rs 400 crore. For May, the State is looking to make a claim of nearly Rs 208 crore, according to Mr B.C. Khatua, Commissioner of Sales Tax, Maharashtra.

He said the tax revenues of Maharashtra in the first quarter of the current fiscal was much below the projected trend of 20 per cent and, therefore, the State had to seek compensation.

"In the last five years, the average sales tax collection growth rate has been over 20 per cent in all the years except one," Mr Khatua said.

He also did not rule out the possibility of the losses aggravating in the coming months as refunds are made.

Maharashtra has adopted a somewhat unique method in allowing input tax credit on opening stock. It had said that all dealers should take the input tax credit on the opening stock in May itself.

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