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Key meet to hardsell VAT virtue

New Delhi, March 23: The VAT panel has convened a meeting of state finance ministers tomorrow to clear the haze and persuade Uttar Pradesh and BJP-ruled states to switch over to the new tax regime from April.

The meeting will be attended by finance minister P. Chidambaram, who has promised full compensation for revenue loss in the first year of VAT implementation, sources said here today.

Chidambaram has so far maintained that VAT will be implemented as scheduled from April 1, even if some states opt out of it.

Some North Block officials have even said that those who opt out will be losers as trade will tend to bypass them.

Most of the states are ready with their VAT legislations. But some of them ' Uttar Pradesh, Rajasthan, Gujarat, Madhya Pradesh, Chhattisgarh and Jharkhand ' have recently expressed reservations on implementing VAT unless traders agree to it and a clear roadmap is announced by the Centre for phasing out central sales tax.

It is not clear whether Bihar and Goa, which are under President's rule, will join the league.

A month ago, the empowered committee had said the Centre would go ahead with VAT even if some states do not opt for it.

The panel, headed by Bengal finance minister Asim Dasgupta, had done the groundwork for a smooth switchover to a transparent VAT regime to ease the cascading effect of multiple taxes in states.

However, following the recent developments in BJP-ruled states and Uttar Pradesh, the panel is now under pressure to bring in a consensus among all the states.

VAT is considered to be the centrepiece of Chidambaram's overhaul of the country's complex tax structure. There will be two basic rates of 4 per cent and 12.5 per cent and a special rate of 1 per cent on bullion, besides a zero rate for social goods, in the new tax regime which is likely to be kick-started from next month.

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