No VAT impact on consumers: Chidambaram

Finance Minister P Chidambaram on Monday said the implementation of a new Value Added Tax (VAT) had not impacted consumer prices.

"WPI based inflation is at 3.84 percent, a two-year low, and consumer price inflation is hovering around 3 to 4 percent. VAT did not have an adverse impact on consumer prices," Chidambaram told the Rajya Sabha in response to a query on whether the implementation of VAT was impacting prices.

The Minister of state for Finance SS Palanimanickam in a written response said 10 state and Union territories have not yet implemented VAT.

Prices of drugs and medicines have come down in most states due to a reduction in the tax rate from 8 per cent under Sales Tax regime to 4 per cent under VAT. States are closely monitoring the price situation to ensure that the benefits of VAT are passed on to consumers.

The Empowered Committee of state finance ministers has advised states to set up special VAT Cells, inter alia, to monitor this aspect and so far, no such proposal has been received from any state in the context of VAT.

The Central Government has also made no proposal to introduce a Central legislation in this regard, he said in the written reply.

In another reply, Palanimanickam said there was no proposal to withdraw the Banking Cash Transaction tax.

He said an amount of Rs.583 crore by way of Fringe Benefit Tax and an amount of Rs.20 crore had been collected as Banking Cash Transaction Tax during the first quarter of the current financial year.

He said since the introduction of the Banking Cash Transaction Tax on 1 June 2005, the collections of the first quarter actually represent collections of only one month.

In another reply, the minister of state said a Committee of Experts had been set up to work out the roadmap for moving towards an Exempt Tax method of taxation. The committee is likely to submit its report by 31 October, 2005.