Sales tax top brass to talk VAT deviations today

Sanjay Jog
Posted: Monday, Jul 14, 2008 at 2230 hrs IST
Updated: Monday, Jul 14, 2008 at 2230 hrs IST

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Mumbai, Jul 13: The deviations in value added tax (VAT) have taken centrestage. The maiden meeting of the newly-constituted expert group of commissioners of sales tax from all states, which will be held on Monday (July 14) in New Delhi, will discuss the issue and work out various suggestions to remove the current deviations.

Various states, including Maharashtra, Kerala, Punjab and Tamil Nadu, to mention a few, have deviated from VAT rates of 0%, 4% and 12.5% and introduced new rates for consumer goods and other items for their benefit. These deviations have also led to unhealthy competition among states to attract investments. Apart from states, industry and business chambers have made a strong plea for removal of these deviations.

The empowered committee has permitted each state to exempt 10 items out of a list of about 50 items of ‘goods of local importance’ to charge an appropriate rate of tax.

Industrial intermediate goods and raw materials are to be taxed at the floor rate of 4% while the rate of 12.5% is the general VAT rate. Most of the state governments have surpassed the empowered committee permissible level of 10 items.

A government official told FE: “The empowered committee of state finance ministers led by West Bengal finance minister Asim Dasgupta has already asserted that the deviations in rates among the VAT implementing states have been contained to a mere 3% of the total universe of 703 items under the next tax regime. One thing is clear, that the deviations in VAT rates are within 20 items in contrast to the 703 items which were prevalent since the launch of the VAT system. The expert group will go deep into the issue and make its report.” According to the officer, the ‘authoritative list’ of deviations in rates would be ‘categorically known’ at the next meeting of the VAT panel, which is to be held at Kovalam in Kerala on August 19.

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