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J&K becomes role model for VAT implementation

The implementation of the VAT by the state government has drawn praise from the Empowered Committee of Finance Ministers.

india Updated: Dec 13, 2006 20:35 IST

The implementation of the Value Added Tax by the state government has drawn praise from the Empowered Committee of Finance Ministers. The Committee has asked the other states to follow Jammu and Kashmir as a role model in the VAT implementation.

Speaking at a meeting of the Empowered Committee at New Delhi on Tuesday, West Bengal Finance Minister, Asim Dasgupta, who is the chairman of the Committee acknowledged the substantial progress made by J&K government in revenue collection through VAT implementation.

He said J&K has become a trendsetter for other states in the country for the efficient implementation of the new tax regime. Earlier, J&K Finance Minister, Tariq Hameed Karra, who is a member of the high-powered Committee, while giving a resume of the progress made by the state in the implementation of VAT regime, drew the attention of the Committee towards some critical issues impeding augmentation of J&K revenues.

Karra said the major area of concern is that New Delhi is dragging its feet on the commitment made with the states regarding the losses suffered by them with the switchover to VAT regime.

He said even after two years of VAT implementation, New Delhi was yet to phase out the Central Sales Tax (CST) and workout the compensation formula for the states including J&K.

He said New Delhi must announce the compensation package in the upcoming union budget to fulfill its commitment in this regard. Karra said that the second area of concern is tax deviation by the neighbouring states on goods listed under VAT. He said while the national average of such deviation is three per cent only, the deviations by the states neighbouring J&K is a staggering 15 per cent.

He said such deviations by the neighboring states cause a huge revenue loss to J&K, and the New Delhi must intervene to prevent the state from bearing this recurring loss.

Karra said the state's cumulative rate of growth in the revenue collection under VAT regime has gone up by 35 per cent and from Rs 455.74 crore ending November 2005, it has shot up to Rs 615.81 crore ending November 2006.

The Finance Minster said during the current year the revenue collection had gone up from 66 per cent in April to 79 per cent in November. The registration of traders under VAT regime has gone up from 22,426 (pre-VAT) to 42,722 registering a growth of 94 per cent, the highest in the country, he said and added that the revenue collection in the State is witnessing a steady growth under VAT regime and the state is now fully geared up to further streamline the regime through the use of latest technology.

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First Published: Dec 13, 2006 20:35 IST