FinMin To Draft New Blueprint For Implementation Of VAT System

New Delhi, May 15: | Updated: May 16 2003, 05:30am hrs
Finance ministry has decided to draw a new road map for introduction of the value added taxation (VAT) system in consultation with political parties and the empowered committee of the state finance ministers.

According to a ministry press release issued on Thursday, the VAT system will be implemented after full preparation. Full benefits of this taxation system can be realised only after all states incorporate the latest set of recommendations of the empowered committee in their respective VAT Bills to pave the way for simultaneous introduction of VAT in all major states, the release said.

While 15 states have agreed to implement VAT, the ministry has received draft amendments only from West Bengal. The states of Maharashtra, Andhra Pradesh and Karnataka have conveyed their willingness to have the amendments legislated.

The committee has taken several decisions in recent weeks to bring about necessary convergence in the VAT legislations of states. It has also addressed some of the major issues posed by various groups of stakeholders.

The committee in its meetings in April and May took several decisions on issues concerning definitions, self-assessment, classification of commodities to be subject to specific rates of VAT, fixing of threshold limits for registration of dealers and for composition of tax liability and input tax credit in various situations. All these decisions of the committee, said the ministry press release, are required to be incorporated in the state VAT Bills.

It may be recalled that all states and Union territories have expressed their commitment to introduce a broadly uniform VAT regime. This was earlier to be achieved by April 1, but the deadline could not be met.

Thereafter, at a meeting on April 8 the empowered committee decided that 15 states would be able to introduce VAT from June 1. These include Andhra Pradesh, Bihar, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Tamil Nadu, Uttaranachal and West Bengal. Haryana has already implemented a VAT system from April 1 without any Presidential assent of the legislation.

The finance ministry has, so far, received VAT legislations passed by the legislatures of only eight states for presidential assent. They are Andhra Pradesh, Gujarat, Kerala, Karnataka, Maharashtra, Madhya Pradesh, Meghalaya and West Bengal. Only in respect of Madhya Pradesh, President communicated assent. That was in November last year.

During an obligatory scrutiny of these legislations by the finance ministry, it was observed that each of these legislations contained considerable variations from the relevant decisions of the empowered committee itself. According to finance ministry, there were variations in respect of definitions, classification of commodities subject to the agreed rates of VAT, treatment of tax incentives for industrial units and several such issues.