States that do not switch to the value-added tax (VAT) in this fiscal are likely to be compensated for only 75 per cent of their notional revenue loss in the first year after transition to the new tax. States switching over in 2003-04 would get 100 per cent compensation, finance ministry officials said.
Finance Minister Jaswant Singh on Tuesday told a BJP committee on VAT that the Centre would not put pressure on states to shift to the new tax, but the lower compensation in effect punishes states for missing the deadline.
According to the officials, states had also been told that any deviation from the set principles of VAT, like continuing with the levy of additional imposts, would also result in lower compensation.
The Centre
