States differ over VAT on grains

VAT panel meet on June 15 to examine floor rates.

A piquant situation has arisen regarding imposition of value-added tax on grains.

The empowered committee of state finance ministers on VAT had, in 2005, decided to allow states the option to exempt grains from VAT in the first year.

However, despite over two months into the second year, several states are yet to bring grains under the value-added tax.

The committee, which is slated to meet on June 15 is expected to take a view on the matter. "The committee will examine the issue of uniform floor rates for certain items. This will include grains," an official said.

Last year, the committee had decided that VAT on grain should be 4 per cent. While some states like Maharashtra had brought grains under VAT at this rate from April 1, 2006, other states which had elections, had postponed the decision.

Officials said there was a difference of opinion among states on the issue.

While a 4 per cent rate was decided last year, some states wanted it to be lowered to 1 per cent. At present, 1 per cent VAT is only on items like gold and silver ornaments.

In its white paper issued last year, the committee had exempted from VAT 46 commodities "" natural and unprocessed products in the unorganised sector, items which are legally barred from taxation and which have social implications.

Of the 46 items, states were allowed the flexibility to choose any ten "" which were of local social importance and did not have inter-state implications "" from a list of goods. The rest of the commodities on the list were to be common across states.

While last year, the VAT covered around 550 items, its coverage has been expanded to include over 700 items.