UP rings in New Year with VAT amid protests

The tax regime now covers all states.

The rollout of value added tax (VAT) in the country has become complete with Uttar Pradesh today adopting the system, which has made 91 items, including kerosene, milk and medicines, cheaper on account of a reduced rate of levy.

VAT, which replaces sales tax, was introduced in April 2005. While a majority of states switched to the new system at once, some held out.

"Keeping in view the needs of the common man, tax rates on 91 items, including kerosene, milk and medicines, have been reduced under the VAT system," said Uttar Pradesh Chief Minister Mayawati.

Uttar Pradesh Governor TV Rajeswar had, yesterday, promulgated an ordinance for implementation of VAT, which was rung in today amid a shutdown by traders.

Union Finance Minister P Chidambaram congratulated the state government for introducing VAT and wished the state success.

Mayawati termed it a historic step that would help the common man get essential and quality items at cheaper rates. She expressed confidence that with the introduction of VAT and aligning the state's tax structure with other states, illegal transportation of goods would be curbed.

'Chikan' clothes, banarasi sarees and handloom items, besides seeds and agriculture equipment, have been exempted from VAT. The tax rate has also been reduced on chemical fertilisers, insecticides, pesticides, water pumps, tractors and tractor-trolleys, and items used in information technology.

Mayawati asked manufacturers and traders to pass on the benefit of the tax reduction to consumers. "Prices of 91 items, including tractor, tea, cycle, milk products, paneer (cottage cheese), cheese, edible oils, readymade garments, chemical fertilisers and match boxes have been reduced," the state government said in an advertisement.

The state government said there would be no increase in prices of 76 commodities, including computers, chemicals, cotton yarn, PVC pipes, grain and oil seeds.

The advertisement claimed Uttar Pradesh was the only state where the VAT law did not have a specific provision for prosecuting traders.

Besides, it added, the government had adopted efficient VAT procedures to enable transfer of refund to traders' account within 30 days.

Referring to the benefits of the new tax regime, it said several items of common consumption would become.

Mayawati termed the traders' shutdown as unfortunate, saying states ruled by parties to which they were affiliated to had already implemented VAT.

She said commercial tax accounted for about 58 per cent of the total state revenues and VAT would increase tax collections. The chief minister said only rates of 20 articles had been increased following introduction of VAT and even these were open for review.