The Telegraph
Since 1st March, 1999
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States to get their pound of flesh

New Delhi, Feb. 14: Finance minister Jaswant Singh today said that the Centre would give 100 per cent compensation for the revenue loss to states in switching over to value added tax (VAT) from April 1 this year.

During the second year the states would get 75 per cent compensation and subsequently it would be reduced to 50 per cent for the third and fourth years.

The minister stated this at a meeting of the parliamentary consultative committee held here. He said that the compensation would facilitate a smooth transition from the current system to VAT.

However, Rajya Sabha MP Abani Roy said: “Several MPs had pointed out to the finance minister that there were many glitches in the countrywide VAT plan proposed by him. It would, therefore, be wiser to delay the introduction by a year.”

Singh admitted that there were still some concerns and apprehensions about phasing out of central sales tax and its impact on the revenues of the states. Several MPs are reported to have emphasised the need for a quick phasing out of the central sales tax so that the full benefits of VAT could be realised by the states.

The finance minister assured the members that a decision in this regard would be taken soon. Members also suggested that there should be uniformity in the legislations enacted by the states.

Singh said that he would convene a meeting of the members of the consultative committee and the empowered committee of state finance ministers to facilitate a better understanding of all issues. He added that a countrywide information awareness campaign was being taken up with special emphasis on dissemination in regional languages for a better understanding of the VAT system.

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