Maharashtra to offer 100% input tax credit under VAT

The state government has decided to offer 100 per cent input tax credit on stock held on March 31. The credit will also be extended to those stock held over a long period and not sold.

Input tax credit is the credit given to the tax payer under value added tax regime.

Speaking at a workshop on VAT, state commissioner of sales tax, B C Khatua said that unlike the Centre's decision to give the credit over a period of six months in monthly installment for the stocks held on April 1, the state has decided to give instant credit.

However, if the goods remain unsold till December 31, 2005, then the tax payer will have to pay the purchase tax on the residual goods and adjust the same as and when he sells it.

Value Added Tax will be implemented in Maharashtra on April 1 and the state will abide by item list and the corresponding taxes in the range of 0-12.5 per cent.

The state will have an exemption limit of Rs 5 lakh and the revenue loss on this account will be compensated by the Centre.

Central sales tax will be kept at four per cent till 2005-06 and then reduced to 2 per cent till 2009, after which it will be removed.

PricewaterhouseCoopers is advising the state on the implementation of VAT. He further allayed the fear that VAT will result in rise in prices . He said that with the lowering of tax rate, prices would come down. Sugarcane tax will, however, continue as the tax on sugar is levied by the Centre.

Pending assessments will continue to be assessed under the old regime. There will be system of voluntary registration that will also require charitable trusts to register if those are in profitable business.

Ramesh Chandra, member secretary, empowered committee of state finance ministers on VAT said that revenue loss for the states of Maharashtra , Karnataka and Uttar Pradesh will be higher than other states.