Tripura gets VAT claim of Rs 4.8 crore

The Centre has released the first compensation claim of Rs 4.89 crore under the new Value Added Tax regime to Tripura for the first quarter of the current financial year.

Andhra Pradesh had also sought a compensation of Rs 193.80 crore for April-June under the new tax. The claim, received last week, is the fourth after Tripura, Maharashtra and Bihar. The claims of Maharashtra and Bihar had been sent back by the finance ministry since the states had not sent a complete performa.

The Centre had set aside Rs 5,000 crore for compensation to the states for loss on account of implementation of VAT from 1 April this year.

Another Rs 100 crore is proposed to be set aside for the Union Territories. Earlier, the Centre and the empowered committee on VAT was of the opinion that revenues would go up in the new regime.

But officials now admit that Maharashtra, Kerala and Andhra Pradesh, where the tax was in force, could end the year with losses. "There are indications that the losses in the first quarter for Maharashtra and Andhra Pradesh would more than Rs 100 crore each," said an official.

As per the compensation formula, the Centre would provide 100 per cent compensation during the current fiscal, 75 per cent during 2006-07 and 50 during 2007-08.

Meanwhile, as part of its initiative to improve collections, the empowered committee has said textile made-ups would attract a VAT rate of 4 per cent.

"There was confusion among traders since textiles attract Additional Excise Duty and there were instances where made-ups were being passed off as textiles to avoid payment of VAT," said an official.

Officials said the committee had also clarified that pre-used cars would attract a VAT of 4 per cent. Similarly, usage of tools would also attract 4 per cent if 50 per cent of the usage was for industrial purposes.

Officials said the process of having a harmonised code (HSN) for the goods under VAT would take some time as the committee was still examining the draft prepared by the Centre for Taxation Studies.