With most states yet to submit their estimates of the extent of revenue loss due to the value-added tax (VAT), today's meeting of the empowered committee of state finance ministers has directed them to complete the exercise quickly.
The issue is critical because the compensation the Centre will work out for the states in the transition to VAT by April 1, 2003, will be on the basis of these estimates.
However, sources said, 20 states were yet to calculate the tax rate that would ensure their revenue did not decline suddenly when VAT was introduced.
Three rates have already been agreed upon, including 4 per cent and 20 per cent besides the exempted zero per cent, along with the list of commodities on which they will be applicable.
While the states and the Centre have agreed in principle on the critical VAT rate of 10-12.5 per cent, the difference in the specific revenue-neutral rate for each state will form the basis of the compensation to be sought by each state.
Officials said today's meeting deliberated on the status of various states with respect to the calculation of revenue-neutral rates.
A committee is expected to submit its report on the extent of compensation to be provided by the Centre to states. However, official sources said, "Unless the states are ready with the rates, the issue of compensation will not be clear."
The meeting further discussed anomalies among states with respect to adherence to uniform floor rates of sales tax implemented across the country on January 1, 2000. The issue of fiscal discipline among states was also taken up, officials said.
