The Telegraph
Since 1st March, 1999
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Mop-up shrinks cushion for VAT

New Delhi, Dec. 25 (PTI): The Centre’s compensation to states for implementation of value-added tax (VAT) this year could be well below the budgeted Rs 5,000 crore since most states witnessed high growth in revenues so far.

Maharashtra topped the list, collecting Rs 8,364 crore from the impost in the first half of 2005-06, followed by Andhra Pradesh (Rs 5,431 crore), Karnataka (Rs 3,972 crore), Kerala (Rs 2,891 crore) and Delhi (Rs 2,529 crore).

Three other states ' Bengal, Punjab and Haryana ' received between Rs 2,300-2,000 crore. “Going by the trends, we expect the VAT compensation to be much less than Rs 5,000 crore,” a finance ministry official said.

The Centre has so far received claims worth Rs 1,598 crore on this score. It forked out Rs 1,027 crore to states that witnessed lower-than-expected collections of revenue.

Most states saw double-digit growth in revenues after VAT was rolled out. Overall collection by the 23 states and union territories increased 14.3 per cent to Rs 33,438 crore in the first half of 2005-06 compared with Rs 29,249 crore from sales tax in April-September last fiscal.

Only three states ' Bihar, Kerala and Maharashtra ' turned in single-digit figures on mop-up. North-eastern states like Mizoram, Arunachal Pradesh, Manipur and Meghalaya totted up 40 per cent growth in collections after switching over to the new tax system this April. Some union territories like Dadra and Nagar Haveli, Daman and Diu saw their tax kitty swelling by over 40 per cent.

The national average of increase in tax collection is 14.3 per cent in the first six months of this fiscal. However, the rise in collections after VAT was the lowest for Bihar at 2.2 per cent and below national average for Kerala (3.8 per cent), Maharashtra (9.3 per cent), Bengal (10.8 per cent) and Andhra Pradesh (10.9 per cent).

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