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Centre's VAT tab may go up

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Monica Gupta New Delhi
Maharashtra has claimed Rs 2,225 cr for VAT losses against Rs 3,000 cr total budget for '05-06.
 
The government will soon have to jack up its current fiscal's budget estimate of Rs 3,000 crore that was to be set aside as compensation for value added tax. Maharashtra alone has filed a fresh compensation claim of Rs 2,225 crore for losses under VAT.
 
Officials said Maharashtra already had an earlier claim of Rs 1,115 crore pending with the finance ministry, taking its total outstanding claim to Rs 3,340 crore.
 
These are claims made for the period July to January and February-March 2005-06, respectively. The state has informed the finance ministry that the fresh compensation claim is mainly due to large number of tax refunds issued in March.
 
In addition to Maharashtra's claims, claims of two other states for the fiscal 2005-06 are also pending with the Centre. These include Rs 40 crore for Haryana for the period April 2005-January 2006 and Rs 3 crore for Sikkim for July-September 2005.
 
The Centre has, in the first week of May, cleared a claim of Rs 236 crore for Kerala, for the period December 2005-March 2006.
 
"With the claims still being settled for the previous fiscal, the ministry will need to enhance the compensation outlay for the current fiscal as the states, particularly those joining VAT from April 1, 2006 will soon begin to file claims for this fiscal," an official said.
 
Officials said there was a view in some quarters that a few states were refunding tax claims in March itself, as the Centre was committed to compensating 100 per cent of the revenue loss under VAT in the first year (2005-06). The compensation will only be 75 per cent this fiscal.
 
While no estimates for a revised VAT compensation outlay had been made so far, officials said the additional compensation demand by states in the current fiscal could be as high Rs 3,000-4,000 crore.

 
 

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First Published: May 17 2006 | 12:00 AM IST

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