The Hindu Business Line : VAT panel turns down Govt plea for cut in rate on biscuits

Any move by the Delhi Government to reduce the VAT rate on biscuits to 4 per cent without the consent of the VAT panel would result in a violation of the uniform floor rate principle, said Dr Asim Dasgupta, Chairman of the VAT panel.

New Delhi , Jan. 31

THE Empowered Committee of State Finance Ministers on Value-Added Tax (VAT) has turned down the Delhi Government's plea to allow it to lower the VAT rate on biscuits from the existing 12.5 per cent to 4 per cent.

"We are not in favour of any change in rates at the fag end of the year," Dr Asim Dasgupta, Chairman of the VAT panel, said, when asked about the stand taken by the VAT panel on the Delhi Government's plea for VAT rate cut in biscuits.

Based on the demand of the biscuits industry, the Delhi Finance Minister, Mr A.K. Walia, had on Monday urged the VAT panel to allow it to reduce the VAT rate on biscuits to 4 per cent.

The uniform floor rate (UFR) for biscuits agreed to by all States under the aegis of VAT panel stood at 12.5 per cent.

Any move by the Delhi Government to reduce the VAT rate on biscuits to 4 per cent without the consent of the VAT panel would result in a violation of the UFR principle.

On its part, the biscuits industry had argued before the Delhi Government that biscuits are items of mass consumption and people of lower strata also consume it. The industry had therefore sought reduction in VAT rate from 12.5 per cent to 4 per cent.

On the issue of textile made-ups, the Delhi Finance Minister admitted that he was in a "state of fix" and that the Government was yet to firm up a decision on the action to be pursued. While it has pegged the VAT rate on textile made-ups at 4 per cent, some of its neighbouring States have exempted textile made-ups from VAT.

Dr Asim Dasgupta, said the VAT design required the States to exempt textiles from VAT in the first year of VAT implementation and not textile made-ups.

"A communication from textiles ministry clearly states that textiles can remain in the exempted category in the first year. But textile made-ups are very different. They cannot remain in the exempted list and we have requested the concerned northern States to take appropriate action. They have assured us that appropriate action on their part would be taken," Dr Dasgupta said.