The Telegraph
Since 1st March, 1999
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VAT falters yet again

New Delhi, April 25: Finance minister Jaswant Singh today did what he had always been vowing not to do — bowed to pressure from party colleagues and as good as announced postponement of implementation of VAT.

This is the third rollback Singh has been forced to concede since presenting his maiden budget speech. The minister has already rolled back the urea price hike and attempts to bring the powerloom sector under the central excise tax net have flopped.

Singh, who was under intense pressure over the last week from party leaders, worried about the impact VAT would have on BJP’s poll prospects, told the Lower House of Parliament here today he would prefer the measure to be introduced by all states simultaneously and “not in a patchwork fashion”.

“VAT is an important initiative which must not and cannot be defeated through faulty implementation,” he said in a speech just before debate on the budget began in Parliament.

Sixteen states producing some three-fourths of India’s manufactures had agreed to bring in the nationwide Value-Added Tax (VAT) from June 1. Singh was supposed to help the move by piloting an enabling Bill besides compensating these states for tax losses suffered from moving from the current system of sales tax to VAT.

However, North Block mandarins today explained that he would now advise these states to delay, pleading that since every state was not ready and there were still certain glitches in the state laws framed they should opt for a delay.

“Singh still remains pro-VAT and will press for this measure after a few months. All that he is saying is let us be pragmatic and not hurry into a set-up which could prove counter-productive,” top ministry officials said. They were, of course, speaking in terms of the administrative fallout but it could just as well be the result of political pressures.

BJP leaders, including deputy prime minister L. K. Advani, Venkaiah Naidu and Delhi leaders Vijay Kumar Malhotra and Madan Lal Khurana, have argued that as the trader lobby has always formed the BJP's most loyal support base it would be disastrous to alienate them by sudden changes in tax measures.

The major north Indian states — Delhi, Rajasthan, Uttar Pradesh and Punjab — had indicated that they would stay out of the VAT net till the next round of assembly elections. However, in a sudden development, Punjab today announced it would bring in VAT from July 1 this year. With this, the only Congress-ruled state to be kept out of the VAT chain now is Delhi.

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