The Telegraph
Since 1st March, 1999
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Traders given reward for strike

New Delhi, April 23: Small traders, who recently downed shutters in protest, and pill-popping citizens can breathe a sigh of relief. Value added tax (VAT) will not hit them as hard as they might have feared.

The empowered committee of state finance ministers for the implementation of VAT, which comes into force from June 1, today decided that traders with yearly revenues of up to Rs 5 lakh would be exempt from the levy.

“This decision was taken to provide relief to small traders,” said Bengal finance minister Asim Dasgupta, the chairman of the committee.

Traders with a yearly turnover ranging between Rs 5 and Rs 40 lakh would be taxed at the meagre rate of 1 per cent of the turnover.

The decision to raise the upper limit to Rs 40 lakh from the earlier level of Rs 25 lakh was prompted by the two-day nationwide strike by traders and dealers — a traditional constituency of the BJP — to protest against the implementation of VAT.

One of the greatest fears for the public at large was that medicine prices would spurt. The VAT regime was to have four slabs — zero rate for food and life-saving drugs, 1 per cent for gold and silver, 4 per cent for intermediate goods or normal inputs for manufacturing, and 12.5 per cent for all other final goods.

Most medicines were placed in the top slab of 12.5 per cent. The committee today decided to reduce the tax rates applicable to medicines and drugs, footwear and some commodities to 4 per cent from 12.5 per cent.

The committee comprising 16 state finance ministers held a meeting to finalise the date of introduction of the VAT rates of 10 and 12.5 per cent on general goods in place of Central sales tax, which will be phased out.

“It was reaffirmed that the participating states would implement VAT from June 1, 2003 onwards,” Dasgupta said.

He added that some special life-saving drugs, along with ‘commodities of local social importance’ — food products like chira, muri and sweets offered for prayer — would be exempt from tax or attract a minimal tax rate.

The states which have agreed to introduce VAT from June are Bengal, Jharkhand, Assam, Maharashtra, Gujarat, Madhya Pradesh, Karnataka, Andhra Pradesh, Tamil Nadu, Kerala, Haryana, Orissa, Bihar, Tripura, Goa and Meghalaya.

Dasgupta explained that the ‘industrial incentive schemes’ of states in the form of deferment, remission and exemption of tax would continue without conflicting with the proposed VAT structure.

“The VAT chain would not be disturbed and so the states would continue to provide incentives to industrial units,” he said.

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