Gaur demands compensation plan
WIDESPREAD APPREHENSION among State traders towards value-added tax (VAT), which delayed its implementation for a year, will probably be cleared after the State?s Commerce and Industries and Commercial Tax Minister Babulal Gaur strongly advocating for a compensation plan at the Centre.india Updated: Mar 12, 2006 15:16 IST
WIDESPREAD APPREHENSION among State traders towards value-added tax (VAT), which delayed its implementation for a year, will probably be cleared after the State’s Commerce and Industries and Commercial Tax Minister Babulal Gaur strongly advocating for a compensation plan at the Centre.
At the meeting of the Empowered Committee of State Finance Ministers on VAT in New Delhi today, Gaur stressed on compensating State Governments against probable losses due to Central Sales Tax (CST) after its implementation.
Demanding a stepwise phasing out of CST from four per cent to two per cent and then to zero per cent, he said the Union Government should compensate the loss in revenue, which would be incurred by States by allocating fund from service tax and the Central Grant.
The Minister said Government should not make CST received by the States a base for implementation of VAT; instead industrial development of various States should be considered a parameter. Reiterating State Finance Minister Raghavji’s budget speech 2006-07, Gaur said VAT would be implemented in Madhya Pradesh from April 1.
He said under the VAT regime maximum items in the unified floor rate of eight per cent would be taxed at 12.5 per cent. “No amendment would be made in the VAT system for the next two to three years and no change in the schedule agreed among all the states would be made,” he mentioned.
In the previous year’s budget (2005-06), Raghavji had announced that VAT would be implemented, which finally did not. There had been a widespread protest against VAT by state traders. Even, the status of taxation on certain goods was not clear like opium, tendu leaf etc.
In this context, Gaur said collection of VAT would not be easy, if it is imposed on textile, sugar and tobacco. “In tandem to other goods of regular use, if tobacco is taxed at four per cent, the State would get a revenue of only Rs 10 crore, whereas at present the State Government receives additional revenue of Rs 150 – 200 crore from excise duty on these items,” he pointed out.
Probably referring to doubts raised by traders earlier on imposing VAT on some selected items, Gaur said in VAT regime yarn would be taxed at four per cent in comparison to current two per cent tax rate and as a result it would get costlier.
Similarly, production of sugar being quite less in the state, a major quantity is imported from other States. “It would be quite difficult to collect VAT on sugar as its sale takes in the unorganised sector,” Gaur stressed.
Considering State’s position in trade, Gaur emphasised on rationalisation and suggested the Union Government should collect revenue due from service tax and income be distributed among all States on the basis of formula chalked out by the finance commission.
Meanwhile, both trade and industry sectors in the State are still quite unclear about the status of VAT to be implemented in Madhya Pradesh.
“State Government should first declare the format and schedule of VAT to be implemented in Madhya Pradesh, otherwise we would not be in a position to give our opinion on it,” said president, Bhopal Chamber of Commerce and Industry, Santosh Agarwal, while speaking to Hindustan Times. “If Government does not make the status public at the earliest, it would rather create confusion,” he remarked.