The Hindu Business Line : Maharashtra gets Rs 1,000-cr VAT compensation

VAT implementation
The compensation package for revenue loss is available for three years.
Till date, the Centre has disbursed Rs 5,571 crore as compensation.

New Delhi , Dec. 23

With value added tax revenues continuing to be buoyant, the Finance Ministry expects the overall outgo to the States under the VAT revenue loss compensation package to be within Rs 10,000 crore.

The compensation package for revenue loss from VAT implementation is available for three years, beginning from April 1, 2005. Till date, the Centre has disbursed Rs 5,571 crore as compensation for revenue loss on account of VAT implementation.

Out of this Rs 5,571 crore, the compensation for 2005-06 amounted to Rs 5,300 crore. Karnataka has got compensation for the current fiscal at Rs 270 crore for April-August 2006 period.

The total disbursed amount of Rs 5,571 crore also includes the provisional payment of Rs 1,000 crore made recently to Maharashtra for the Rs 2,200-crore claim made by the State for February-March 2006 period. In all, Maharashtra has claimed about Rs 3,400 crore as revenue loss compensation for fiscal 2005-06.

Official sources said that the full settlement of Rs 2,200 crore claim would happen only after Maharashtra's Accountant General submits an audit certificate on the VAT refunds made by the State in March 2006.

Huge refunds

"Maharashtra has made huge VAT refunds in March 2006. These have to be audited and verified. The Government of Maharashtra has to submit an internal verification report on the refunds. The State's AG should also submit audit certificate and only then the remaining funds can be released," sources said.

Apart from the remaining claim of Rs 1,200 crore of Maharashtra, the Centre does not have any other significant pending claim from any of the States.

Tax revenues of VAT-implementing States are growing by about 25 per cent year-on-year during the current fiscal.

The Centre has already turned down the request of Tamil Nadu Government to count the three-year period for availing VAT loss compensation from January 1 next year. Tamil Nadu is expected to implement State-level VAT from January 1 next year.

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