States agree on uniform VAT rates

Twenty one states, which have switched over to value added tax (VAT), today agreed to adopt uniform rates for industrial input, capital goods and essential commodities like medicines, salt, bread and PDS items.

"It has been possible to arrive at a full consensus among states on convergence of VAT rates. All states will come out with notifications on VAT rates by the end of this month," Asim Dasgupta, chairman of the empowered committee on VAT, said after a marathon meeting of state finance ministers today.

Medicines, medical equipment and devices will attract 4% VAT. "The empowered committee will form a view on what is to be included in life saving drugs," Dasgupta said.

The meeting also discussed thread-bare the tax treatment of petroleum products. "Diesel and petrol will be out of VAT while LPG can attract VAT," he said.

Dasgupta said industrial inputs and capital goods will attract VAT at 4%. He, however, added there will be a small list of capital goods like building material that will be exempted.

Essential items like branded and unbranded salt, bread, gur, jaggery and all food items distributed through the public distribution system will be exempted from VAT.