Sales tax rates not fiddled with

Nationwide VAT implementation awaited

Remaining non committal on the date when VAT (value added tax) will be implemented in Gujarat, state finance minister Vajubhai Vala reiterated in the Budget speech that it will be proper that all states implement VAT simultaneously.

The uncertainly of the date when VAT will come into force is perhaps one reason why the state government has, barring CNG conversion kits, left the sales tax rates untouched in the 2005-06 state budget.

The CNG conversion kits have been left out of the purview of sales tax, Earlier these attracted sales tax at 12 per cent rate.

When asked why sales tax had been left generally untouched, Vala told Business Standard, "VAT is not the only reason. In fact, over the past few years, the state government has reduced sales tax to floor rates and this is evident from the fact that no more representations are being made to reduce sales tax."

Depending on the rates fixed across the country, there are five slabs of sales tax, depending on the sector or goods. The rates are one per cent, two per cent, four per cent, eight per cent and 12 per cent.

However, Manjula Subramanian, principal secretary, finance, said, "Sooner or later VAT is to be implemented across the country. It makes little sense to change sales tax rates in such a scenario."

Vala maintained that Gujarat has completed all the necessary homework for the implementation of VAT and the state is in a position to implement it at a day's notice.

"All that the state government needs to do is issue a notification. But it is necessary for all states to implement VAT simultaneously," he said.

In March 2003, the Gujarat legislative assembly passed the Gujarat State Value Added Tax Bill 2003. The bill was then sent to the government of India for presidential assent.

However, after detailed discussions at the central level, it was decided in May 2003, to postpone implementation of the VAT Act on grounds that similar changes need to be made in the VAT proposals of all the states for simultaneous implementation.

In the meantime, it was decided at deliberations of the Empowered Committee of State Finance Ministers that each state will make the necessary amendments in their VAT act to incorporate the "common points of convergence" agreed by the committee. A white paper on the State Level Value Added Tax was published on January 17, 2004, by the empowered committee.

"The President of India has already given assent to the Gujarat Value Added Tax Bill, 2003, on January 17, 2005, and this has been published in the gazette dated January 25, 2005. The Gujarat Value Added Tax Act 2003, however, need to be amended keeping in view the white paper and common points of convergence that have been agreed upon," the finance minister said in his budget speech.

Later, speaking to mediapersons, Vala stated that Uttar Pradesh was reluctant in implementing VAT from April 1, 2005, and a few other states too were non committal on its implementation from the next fiscal.

Commenting on octroi abolition from the seven municipal corporation areas of the state, the finance minister said that this will be eventually considered, as an assurance to this effect has been made by the BJP in its election manifesto.