FM Assures VAT Compensation

New Delhi, February 14: | Updated: Feb 15 2003, 05:30am hrs
Finance minister Jaswant Singh has said that the Central government will compensate states for losses as a result of transition from the current system of taxation to Value added Tax (VAT) regime.

Addressing the finance ministry consultative committee meeting here on Friday, Mr Singh said that to ensure least disruption, states would get 100 per cent compensation of possible revenue loss in the first year (2003-04) and at 75 per cent and 50 per cent for the next two years.

According to an official press release, members of Parliament (MPs) cutting across party lines, expressed strong support for the introduction and implementation of VAT in all states and Union Territories with effect from April 1, 2003.

Mr Singh told the members that introduction of state level VAT was one of the most important fiscal reforms which would make the commodity taxation system simpler and more transparent. It will also improve revenues of the states. The minister also apprised the committee of the details of the steps being taken by the Central government to augment the revenues of states through taxes on services and on items subject to additional excise duty.

Several MPs who attended the meeting emphasised the need for a quick phase-out of the Central Sales Tax, so that the full benefits of the VAT could be realised by the people in all states, including the less industrialised states.

The minister assured the MPs that a decision in this regard would be taken soon. MPs also suggested that there should be uniformity in the legislations enacted by the states.

Mr Singh said that he would convene a meeting of the members of the consultative committee and the empowered committee of state finance ministers to facilitate a better mutual understanding of all issues.