The Telegraph
Since 1st March, 1999
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New route for entry of VAT

New Delhi, May 15: Finance ministry today said a “new roadmap for implementing VAT will have to be drawn up” after announcing only Bengal has so far sent in a revised law to usher in the nation-wide tax.

Though three more states — Maharashtra, Karnataka and Andhra Pradesh — have told the Union finance ministry that they, too, will be sending revised Bills for Presidential assent, the ministry has decided a new roadmap and time-table will have to be chalked out.

Revised tax law Bills were needed as some 11 states who had agreed to bring in VAT early this month wanted some provisions, including tax rates for medicines and drugs, changed. VAT is a multi-point sales tax, with set-off for tax paid on purchases at the preceding stage.

An official statement said the new roadmap would be drawn up in consultation with the main political parties and the empowered committee of state finance ministers.

“It was observed that these laws contained considerable variations from the relevant decisions of the empowered committee itself. To illustrate, there were variations in respect of definitions, classification of commodities subject to agreed rates of VAT, treatment of tax incentives for industrial units and several such issues.”

The Union’s role in bringing in this tax is limited to helping states get the President’s assent and agreeing to compensate them for losses suffered in the new system. It could result in some revenue losses for states in the transition period even as it helps the Union realise more excise or production tax as the VAT tax chain is computerised.

Many states like Haryana, Madhya Pradesh and Southern states had decided to go ahead with VAT even if central compensation is not forthcoming. Eleven states had earlier decided on May 5, to go ahead with implementing VAT by June 1 as they were “ready” and another 5 had decided to follow shortly.

This decision was taken despite Union finance minister Jaswant Singh telling MPs in Lok Sabha: “Jab tak VAT ki puri tayyari nahin hoti hai, tab tak VAT lagoon nahin hoga (till all arrangements for VAT are readied we will not bring in VAT)”.

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