VAT regime may be more liberal in MP

More commodities may be taken out of the ambit of the tax

"Milk and milk products will be out of the ambit of VAT," a government source told Business Standard, adding "the committee is likely to cut VAT on certain commodities and take more items out of the VAT purview."

The committee, headed by Commerce and Industry Minister Babulal Gaur and with other members like Finance Minister Raghavji and Forest Minister Himmat Singh Kothari, accepted the second round of suggestions on VAT from various trade and industry representatives on Saturday.

According to the source, milk, milk products, flavoured milk, curd, and chhachh (butter milk) will be out of VAT but mawa (condensed milk in raw form), ghee, and butter will continue to attract the 12.5 per cent tax.

The meeting, chaired by Gaur, decided that locally made agri implements would be out of the VAT ambit.

Representatives of cement units asked for a cut in VAT since, according to them, it (VAT) had increased the cost of production. Bhopal Chemist and Druggist Association chief Basant Gupta asked for VAT on maximum retail prices of drugs; and Mahendra Singh Chaudhury, chairman of the Madhya Pradesh State Seed and Farm Development Corporation, an MP government entity, said certified seeds should be out of the VAT purview.

However, government insiders said the state government had imposed VAT without doing any homework.

Although the committee has assured various trade industry organisations slashing VAT if rates fixed by the Empowered Committee on VAT in other states were lower, the state commercial tax department has raised entry tax on various items without taking permission of the committee.

"By issuing an Ordnance on March 30, the state commercial tax department raised entry tax on certain commodities to compensate for the losses."

Gaur, in a meeting organised by Ficci recently, had said, "The central government is not compensating us for our losses due to VAT and even if there is any compensation it is not more than 50-75 per cent."

The committee will also decide on entry tax on pulses and rice, VAT on food distribution under the World Food Programme and VAT on diesel in its next meeting.

Ajay Singh from Grasim Industries, Pankaj Sharma of JP Cement, Anil Agrawal of Prism Cement and Giriraj Bhatt of Maihar Cement represented the cement industry.