According to state finance minister, Prof Sampat Singh, With the introduction of VAT, Haryana is likely to incur a loss of Rs 500 crore per annum because the rate of central sales tax (CST) would then be reduced to 0.5% to 2 per cent. At present, the state earns about Rs 1,000 crore as CST. The Union finance ministry has linked abolition of CST with VAT, throughout the country.
Prof Singh told FE that the state has no immediate cause for worry on the count because in the first year the Centre has committed to compensate the state to the tune of 100 per cent for the loss on account of abolition of CST. What worries Haryana is that VAT starts from 2003-04 when CST would be reduced to 1 per cent, but the Centre has committed to compensate only 75% of the loss on this score. In the third year of VAT, CST is required to be completely scrapped and Centres assistance would be reduced only to 50 per cent. From the fourth year, there would be no help on this count from the Centre.
The finance minister reiterated that keeping in view the representations of the small traders and SSI units, the state government has done away with VAT-related paper work and introduce a lumpsum pyment of state sales tax. For this, these categories of traders need not maintain account books.
Similarly, the tax slabs under VAT are proposed to be reduced to only four. And if the trade co-operates with the government, in the ultimate analysis, net generation of revenue would increase without slapping new taxes. Besides, the proposed bill, drafted after a two-year long discussion with the assessees, a provision has been made for tax-credit for registered tax dealers, who opt to carry forward the tax to next month or quarter, in case their credit exceeds the tax collected by them.