VAT states differ in tax collection

States, which have adopted value-added tax from April 1, 2006, have shown varying growth rates for tax collected in the first two months of the current fiscal.

While Chattisgarh, with a collection of Rs 206.86 crore, has registered a healthy growth rate of 42 per cent during April-May over the previous year, Gujarat, with a collection of Rs 1,725.34 crore, has witnessed a growth rate of just 11 per cent in tax collection over April-May 2005.

Similarly, Madhya Pradesh has registered a growth rate of 45 per cent during April-May over the previous year with collections of Rs 495 crore, while Rajasthan has clocked a growth rate of 23.5 per cent with VAT collections of Rs 936 crore.

Jharkhand, which also adopted VAT on April 1, clocked a growth rate of 21 per cent over April-May, 2005, according to the latest data made available to the empowered committee of state finance ministers on VAT.

"The wide discrepancy in the growth rate of the new states could be on account of different refund practices being followed by them. While some states are allowing full input tax credit on the opening stock, some other states allow traders to claim only one-sixth of the credit in a month," a ministry official said.

Officials added that states which allowed full credit on the opening stock would show lower growth in the initial months.

"The growth rate in the first month is also not truly reflective of VAT since it would include sales tax collection. Sometimes the tax paid in the month of March is credited and reflected in April," officials said, adding that the real VAT collections would be visible after May.

All the states under VAT have clocked a combined growth rate of 23.5 per cent during April-May over the previous year. The growth rate in the first few months under VAT last year was around 14 per cent.

Interestingly, the gap in the growth rate between VAT and non-VAT states has also come down. Last year, gap in the growth rates between VAT and non-VAT states was relatively high.

The non-VAT states "" Uttar Pradesh, Tamil Nadu and Pondicherry "" registered a growth rate of 23.4 per cent. While VAT states had clocked 14 per cent growth, non-VAT states had registered a growth rate of around 21 per cent.