The Government on Tuesday said it plans to seek supplementary grant for compensating states for revenue loss on account of VAT for 2006-07, as budgetary provisions for the purpose will not be sufficient.
This is because claims by states for 2005-06 have been received this fiscal, Minister of State for Finance SS Palanimanickam told the Rajya Sabha in a written reply.
The amount involved in these claims is much higher than what was estimated at the time of finalisation of budget estimates for 2006-07, he said.
Out of these claims, claims for a total amount of Rs 1,695.37 crore have already been settled, the Minister of State for Finance said.
The additional requirement is proposed to be met by seeking sanction of supplementary grant, he said.
The Union Government is scheduled to fully compensate states for revenue loss on account of VAT during 2005-06 and the compensation is reduced to 75 per cent for the current fiscal and further to 50 per cent during 2007-08.
To another question, he ruled out formulation of a National Policy on VAT, saying no state has made any such demand.
Tax revenue of VAT-implementing states has registered a 26.6 per cent increase during the first quarter of this fiscal year-on-year, Palanimanickam said.
Though it is not feasible to segregate the effect of VAT on prices in precise terms, overall rate of wholesale prices-based inflation had consistently declined after implementation of VAT—from 5.70 per cent for the week that ended on April 1, 2005 to 3.51 per cent during the week that ended on April 1, 2005, he said.