New Delhi, Feb. 27

The Economic Survey 2005-06 has called for early introduction of State-level value-added tax by the remaining eight States/Union Territories, stating that its non-implementation was creating complications and may also lead to undesirable diversions of trade and business from one State to another.

"The benefits of the VAT system like simple and uniform tax structure all over the country and achieving a common market for goods would not accrue until all the States/UTs implement VAT at the earliest," says the Survey.

Moreover, it has also highlighted that the successful implementation of Central sales tax (CST) reforms would require all States/UTs to first successfully implement the State-level VAT.

The Survey has also said that the Centre's compensation liability for the year 2005-06 is likely to be contained within the Budget estimate (Rs 5,000 crore). A compensation formula had been finalised in consultation with the States for providing compensation to them, during the first three years, for any loss on account of introduction of VAT.

Up to January 15, VAT compensation claims for about Rs 1,674 crore had been filed by eight States, out of which claims for Rs 1,317 crore has been settled.

Our Bureau

(This article was published in the Business Line print edition dated February 28, 2006)
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