The Hindu Business Line : Karnataka Assembly passes VAT Bill

THE Karnataka Legislative Assembly on Friday passed the Karnataka Value Added Tax (Amendment) Bill, 2005, thus giving effect to the decisions taken at the national level to replace the existing sales tax system. VAT will come into force form April 1.

The Deputy Chief Minister and Finance Minister, Mr Siddaramaiah, who presented the Bill, said the States have the option of coming out of the VAT system, if the teething problems persist and the Centre is not able to resolve them. It is not binding on any State to be part of the system as sales tax is a State subject, he said and mentioned how Uttar Pradesh had opted out.

He said 550 goods are covered under the VAT system with two basic rates of 4 per cent and 12.5 per cent.

The Centre has agreed to bear the loss of the States by 100 per cent in the first year, 75 per cent in the second year and by 50 per cent in the third year. It is estimated that Karnataka would lose about Rs 1,800 crore annually which the Centre would be compensate.

On service tax, which comes under the purview of the Union Government, he said the State has sought to levy the same for which an amendment in the Central Act is necessary.

Stating that the goods exempted from VAT include petrol including special boiling spirit; liquor including beer, feni, liqueur and wine; and rectified spirit, Mr Siddaramaiah said that the State has been empowered to levy tax on these items. Karnataka would announce the tax rates for these items after the neighbouring States have announced.

"At the moment, we cannot tell whether it will be on par with other States or not. We will discuss this at the Empowered Committee meeting scheduled this month."

In Karnataka, he said, sales tax on petrol is 28 per cent and diesel 20 per cent, while in Tamil Nadu it is 30 per cent. But it is transportation charges that make petrol costlier in Karnataka than that in Tamil Nadu and Goa.

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