The Hindu : New Delhi News : Delhi watching neighbours closely on VAT

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Tuesday, Mar 08, 2005

New Delhi

New Delhi

Delhi watching neighbours closely on VAT

By Our Staff Reporter

NEW DELHI, MARCH 7. Brushing aside any uncertainty about the introduction of the new taxation regime in the Capital, the Delhi Chief Minister, Sheila Dikshit, today asserted that Delhi was well prepared and determined to go ahead with implementation of progressive and consumer-friendly Value Added Tax (VAT) regime from April 1.

Notwithstanding the rigid stand adopted by neighbouring Rajasthan and Uttar Pradesh casting a veil of uncertainty over the implementation of VAT, the Chief Minister said the Delhi Government was keeping a close watch on developments on that front. Both Rajasthan and Uttar Pradesh have sought certain clarifications on the issue of phasing out of Central Sales Tax and the road map for implementation of the same. However, as far as Delhi was concerned, there was no delay or hitch in switching to the new system and VAT would come into force in Delhi from next month.

The Empowered Committee on VAT today held prolonged discussions with the various States and assured redressal of grievances and the issues raised by them. "I have asked my Finance Minister and officers to assess the impact in case Uttar Pradesh prefers to stay away from the new regime. We are ready for implementation and everything is in full gear,'' she remarked.

The Finance Minister, A.K. Walia, who also attended the meeting, said that Delhi had done all the groundwork for putting in place the new taxation regime and all the rules and regulations had been updated. The Capital is fully geared to go ahead with VAT and would not postpone its implementation at any cost.

However, Delhi has certain concerns on bringing some items of mass consumption under the new regime and has sought clarification from the Empowered Committee on the issue. For example, items like food grain today invite zero per cent tax but under the new regime would fall under the 1-4 per cent tax bracket. It is learnt that Delhi is keen that food grain and essential commodities be exempted from tax and that they be brought under the tax neutral regime so that it does not lead to any kind of price rise under the new system.

However, it is almost certain that diesel, that invites 12 per cent sales tax, would be become costlier from April 1 as it would be brought into the 20 per cent taxation category thereby pushing up the price of this petro product. It may be recalled that Dr. Walia, while presenting the Delhi budget for 2004-05, had imposed 20 per cent sales tax on diesel but had to withdraw the same following intense pressure from the diesel lobby and petrol pump owners. Officials argue that this time the move would not face any opposition as the adjoining States of Haryana and Uttar Pradesh would also be taxing diesel at 20 per cent rate leaving little scope for any price discrepancy.

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