Our Bureau

New Delhi, March 19

CREATING a major roadblock to the introduction of value-added tax (VAT) system in the country from April 1, the Bharatiya Janata Party (BJP) today said that the States ruled by it would not implement VAT unless the new tax system was "uniformly implemented" in all States at one go.

The State-level VAT is scheduled to become operational from April 1 this year.

The BJP decision emanated at a meeting of its Chief Ministers that was convened in the Capital to review the status of implementation of VAT.

The BJP President, Mr L.K. Advani, chaired the meeting, which was also attended by the former Finance Minister, Mr Jaswant Singh, the former BJP president, Mr Venkaiah Naidu, and the BJP General Secretary and former Finance Minister, Mr Yashwant Sinha.

The Chief Ministers, Mr Babu Lal Gaur (Madhya Pradesh), Ms Vasundhara Raje (Rajasthan), Mr Raman Singh (Chhattisgarh), Mr Arjun Munda (Jharkhand) and the Gujarat Finance Minister, Mr Vajubhai Vala, attended the two-and-half hour meeting here today.

Besides demanding a clear roadmap for phase-out of the Central Sales Tax (CST), the BJP conclave also held that "piecemeal implementation of VAT was undesirable".

Elaborating on the decision, Mr Advani said the proposed regime should be uniformly implemented as otherwise there would be lot of "chaos and confusion" if big States such as Uttar Pradesh (ruled by the Samajwadi party) and Tamil Nadu (ruled by the AIADMK ), who are yet to pass any legislation, were out of the VAT system.

Mr Advani also made it clear that all the five BJP-ruled States, including Jharkhand, which was yet to pass VAT legislation, were in a position to implement VAT from April 1.

Mr Sinha told presspersons after the meeting that it was essential that VAT be introduced only after taking care of the fiscal interests of the States, the concerns of tax-payers and the consumers. He also said that the Chief Ministers of BJP-ruled States expressed concern over the continuation of CST along with the VAT regime.

"The introduction of the new system should be after requisite preparatory steps are taken and a general atmosphere of support is created," he said.

VAT implementation is already being opposed by a large section of traders all over the country, mostly by those with close affiliation with the BJP.

Besides, there is large-scale apprehension among the trade and industry about the possible impact of the new taxation system and reports have come in of sections of trade not ordering fresh supplies in view of the uncertainty surrounding VAT.

There is some confusion about the promised compensation by the Centre of any possible revenue loss on account of VAT in the first year. While a budgetary provision of Rs 5,000 crore has been made by the Finance Minister, Mr P. Chidambaram, in the 2005-06 budget, the States, with their own estimates of revenue loss, feel that this amount would be inadequate to meet revenue shortfalls that might occur because of VAT.

(This article was published in the Business Line print edition dated March 20, 2005)
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