VAT may add 25% to state revenues

Implementation of value-added tax will increase the revenues of states by as much as 25 per cent, Ramesh Chandra, member-secretary of the Empowered Committee of State Finance Ministers on VAT said today.

Admitting that there was a lack of uniformity in the VAT rates of various states, Chandra said a meeting of state finance ministers and officials of the empowered committee would be held on April 15-16 to review the post-VAT situation.

Issues such as increase in prices of some consumer goods would also be taken up at the meeting.

Chandra said it a decision had been taken to have a meeting of the committee every month. States had also been told to have a consultative committee at least for one year, he said.

"It is true that the there is lack of uniformity in the VAT rates of various sates. That is why the next meeting of the empowered committee scheduled for first week of May first week has been rescheduled to April 15-16," Chandra told reporters on the sidelines of a national conference on state VAT organised by the Assocham and PHDCCI.

On the issue of levying VAT on imports, he said the committee was in favour of it but it was for the Centre to decide.

During his interaction with traders, Chandra said the empowered committee would take up the issue of abolishing entry tax and other entry taxes in some of the states that have implemented VAT, including Maharashtra.

Reacting to traders' submission that some states were levying VAT at a rate of 4 per cent on the gross value, instead of levying it on the value added, Chandra said the empowered committee would take up this issue with six of the bigger states, including Delhi and Maharashtra.

Chandra said the committee was talking to states that have not implemented VAT. "They will introduce it sooner or later," he said.

Delhi Finance Minister AK Walia, who was also present in the conference, assured traders that the state government would consider the issues arising out of the difference in tax rates in the neighbouring states.

Traders pointed out that in Rajasthan, bullion was taxed at 0.05 per cent, compared with 1 per cent in Delhi. Similarly, opticals, which attracted 2.5 per cent sales tax in Rajasthan and 5 per cent in Uttar Pradesh, was taxed at 12.5 per cent in Delhi.

The traders also said the Delhi government was charging higher tax at 20 per cent on lubricants, which were taxed at 12.5 per cent in other states.