The Hindu : National : VAT States agree on uniform tax rates

Online edition of India's National Newspaper
Wednesday, Apr 27, 2005

National

National

VAT States agree on uniform tax rates

Ashok Dasgupta

NEW DELHI: In yet another milestone in VAT (Value-Added Tax) implementation, all the 21 States under the new taxation regime on Tuesday agreed to impose uniform levy rates on various products in lieu of the erstwhile sales tax. The States have agreed to notify the specific tax rates on various products by the end of this month.

As per the consensus reached at the meeting of the Empowered Committee of State Finance Ministers on VAT here, a uniform tax of four per cent is to be levied on industrial inputs, capital goods and medicines as also medical equipment and devices.

Exemptions

Totally exempt from tax would be essential commodities such as salt (branded and unbranded), bread, gur, jaggery, khadi products and all food items sold under the public distribution system (PDS). A small list of capital goods such as building materials will also be exempted from VAT.

The VAT panel meeting was also attended by the Union Finance Minister, P. Chidambaram, who reiterated his assurance on the compensation package for any revenue loss that the States may incur on switching over to new tax regime. Under the package, which is to be ready "within a few days", the Centre will provide 100 per cent compensation for any such revenue loss in the first year, 75 per cent in the second and 50 per cent in the third year of VAT implementation

Briefing newspersons after the marathon meeting, the Chairman of the Empowered Committee and West Bengal Finance Minister, Asim Dasgupta, said: "It has been possible to arrive at a full consensus among States on convergence of VAT rates. All States will come out with notifications on VAT rates by the end of this month."

A number of life-saving drugs are also to be exempted from tax. "The Empowered Committee will subsequently form a view on what is to be included in (the exempted) life-saving drugs," Mr. Dasgupta said.

The VAT panel also discussed at length the tax treatment that should be meted out on petroleum products and the consensus reached is likely to provide some relief to customers of diesel in Delhi.

At the meeting, the Committee reiterated its earlier stand and agreed to keep diesel and petrol out of the purview of VAT, barring liquefied petroleum gas (LPG).

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