The Telegraph
Since 1st March, 1999
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VAT on the mat, rescue efforts on

New Delhi, April 1: The Central government today officially confirmed that the nation-wide VAT (value-added tax) will not come into effect for some more time because of the differences between states. However, in Haryana the new regime came into effect today.

Confirming the statement made yesterday in Calcutta by Bengal finance minister Asim Dasgupta, who is also the chairman of the empowered committee of state finance ministers on VAT, the Union finance ministry today said, “It is clear that states would not be able to introduce VAT by April 1 ... The empowered committee, now slated to meet on April 8, should consider the matter afresh and unanimously decide upon the date with effect from which states would be in a position to introduce this progressive measure.”

The finance ministry, in a communique, said so far it had received VAT legislations for Presidential assent from Gujarat, Kerala, Maharashtra, Madhya Pradesh, West Bengal, Andhra and Karnataka. While Madhya Pradesh legislation had received the Presidential assent, others were in the pipeline.

“However, the introduction of VAT in a patchwork form by individual states without corresponding action by others is not a workable proposition. It is clear, therefore, that states would not be able to introduce VAT by April 1, in accordance with the commitment made by them,” the finance ministry’s communication said.

Dasgupta yesterday announced in Calcutta that states were pushing back the timetable as some of them were still not ready and a new date would be fixed at a meeting of the committee of state finance ministers on April 8.

Sources said finance minister Jaswant Singh and Dasgupta were busy throughout the day coordinating efforts to get late comers and doubting Thomases amongst state governments to come aboard.

Singh is also trying to get dissenters in Bharatiya Janata Party (BJP) to agree to VAT being brought in. Several north Indian leaders from the BJP, which has a large trader constituent in its cadre and supporter base, are apprehensive of the VAT legislation as it has raised the ire of the trading community.

Traders, unhappy at having lost the chance of making money on sales tax they always charged customers but never paid to the taxman, are up in arms and are anxious to push back their date with honesty.

The finance ministry today also finalised plans to launch a multi-crore advertising blitz in favour of VAT. A host of top national advertising agencies, including big names like HTA, Ogilvy & Mather and Rediffusion made publicity plan presentations designed to woo the public at large and decision makers and traders in particular.

The message that the government wants to get across is that VAT is more transparent, progressive and equitable than the current sales tax regime. And that it will still keep small traders and dealers who are the backbone of the movement against VAT out of the loop.

Several states, including Delhi, Uttaranchal, Tamil Nadu and Punjab, under pressure from trader lobbies have held back from bringing forth a VAT legislation as yet despite agreeing earlier to bring in VAT on April 1.

These states as well as others have already witnessed a 48-hour trade strike which has seen many major markets and wholesale depots shut.

On the other hand states like West Bengal, Karnataka, Gujarat and Maharashtra said VAT could not be implemented now in the absence of Presidential approval of the fiscal measure while Rajasthan and Kerala said they could not enforce it because of “uncertainty” in neighbouring states on its implementation.

If Dasgupta and Singh can get the doubtful states in their basket, those who had committed earlier will stay on course. If they fail to bring the doubters back into the fold, there could be more trouble for VAT than expected.

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