The Hindu Business Line : VAT group to submit report by Feb 15

CORPORATE India may soon get a clear picture on the manner in which the various sales tax-related incentive schemes would be treated under the proposed State-level value-added tax (VAT) system.

A small group constituted by the Empowered Committee of State Finance Ministers on VAT is to submit its report on the incentive schemes by February 15, Mr Ramesh Chandra, Member Secretary of the Empowered Committee, said at a workshop on VAT organised by the PHD Chamber of Commerce and Industry (PHDCCI) here on Friday.

"The main issue is to suggest a framework that would enable the States to continue with the incentive schemes without breaking the VAT chain," he said.

The white paper on State-level VAT, released on January 17 by the Union Finance Minister, Mr P. Chidambaram, stated that the existing incentive schemes may be continued, under the VAT system, in a manner deemed appropriate by the States after ensuring that the VAT chain is not affected.

India Inc has been stressing that sales tax deferments/ exemptions/ incentives, already granted to industries being part of the commitment, must not be disturbed on any pretext and should be allowed for the period and limit as already fixed under the statutory sanctions.

Regarding VAT on imports, Mr Chandra indicated that the Empowered Committee was likely to suggest to the Centre a 4-per cent VAT on imports and the set-off would be available on any such import.

A proposal for VAT on imports, including the collection mechanism with adequate safeguards for the protection of interest of land-locked States, is being discussed by the Committee and the Union Finance Ministry.

On Central Sales Tax (CST), Mr Chandra hoped that States would adopt a CST rate of 2 per cent from April 1, 2006. Both the Centre and the Empowered Committee have already announced that CST at the rate of 4 per cent would continue to exist in the first year of VAT implementation (2005-06).

States are now collecting nearly Rs 15,000 crore from CST every year.

On the issue of classification of commodities, Mr Chandra said the existing list of 550 goods was not sacrosanct and could always be expanded. He also said industrial inputs would attract a VAT rate of 4 per cent.

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