VAT loss bill may go up by Rs 3,000 cr

The finance ministry is likely to increase Budget provision to compensate states for losses incurred under value-added tax by another Rs 3,000 crore.

The ministry had earlier set aside Rs 3,000 crore for the current fiscal but the amount is likely to be used up in clearing last year's compensation claims.

In addition to an outstanding claim of Rs 3,340 crore from Maharashtra, Karnataka has also filed a compensation claim of Rs 230 crore for the month of March.

"We are still getting last year's compensation claims. Maharashtra's compensation claim of Rs 1,146 crore for the period of July-January 2005-06 is presently being processed and will be settled soon. The second claim of Rs 2,225 crore for February-March is being examined," an official said.

Apart from the claims of Maharashtra and Karnataka, claims from two other states for the fiscal 2005-06 are also pending with the Centre. These include a Rs 40-crore claim from Haryana for the period April 2005-January 2006 and Rs 3-crore from Sikkim for the period July-September 2005.

Officials said compensations for the current fiscal would, however, be lower since the Centre was committed to compensate only up to 75 per cent of the total losses incurred by the states.

During 2005-06, the first year of VAT, the Centre was committed to compensating 100 per cent of the revenue losses under the new regime.

In the first week of May the Centre had cleared a claim of Rs 236 crore for Kerala pertaining to the period December 2005-March 2006.