Major States Not Ready For VAT Deadline

New Delhi, February 21: | Updated: Feb 22 2003, 05:30am hrs
The April 1 deadline to implement Value Added Tax (VAT) is unlikely to be met as major states like Tamil Nadu, Delhi and Haryana are not ready to introduce the VAT Bill in the Budget session of their assemblies.

While Delhi is reluctant due to the forthcoming state election in October 2003, Haryana is waiting for the Capital to take the lead, a Confederation of Indian Industry (CII) report on States Preparedness to Implement VAT from April 1, 2003 said.

The report expects only 15 states and five Union Territories (UTs) to implement VAT on April 1, 2003. Karnataka, Punjab and Gujarat are likely to introduce the bill in their respective assemblies between February and March 2003, it said.

In Tamil Nadu, the decision to implement VAT depends upon the political will of its chief minister, it said adding that the state has not yet procured hardware to meet the system requirements. The industry in the state is paying a non-creditable sales tax of 3 per cent on local inputs and the disadvantage will continue till VAT is implemented, it said.

The report pointed out that political leadership of Gujarat is willing to implement VAT as per schedule. KPMG is expected to submit its report to the state government on reorganisation of states tax department.

Proposal to reduce central sales tax (CST) from four per cent to two per cent in 2003-04 is being considered as hindrance in smooth implementation of VAT in Gujarat, it added.

Commenting on the current status of states preparedness, the report said: Only Madhya Pradesh has passed the legislation and obtained clearance from the central government.

The report has given full marks to Karnataka for its commitment preparedness to implement VAT by April 1. Industry will be benefited in the state on implementation of VAT as the disadvantages of non-creditable four per cent sales tax on locally purchased inputs and two per cent entry tax on capital goods brought from other states will be reduced to zero, it said.

The deadline to implement VAT was extended from April 1, 2002 to April 1, 2003, due to divergent views on treatment of existing sales tax incentives already granted by states, treatment of CST under VAT and lack of preparedness by states.