Vat compensation process simplified
To simplify the Vat compensation process, the finance ministry has waived the requirement of prior Accountants General certification for sanction and release of amounts. According to a senior ministry official, states will get compensation for any revenue loss on Vat every month, without prior nod of AGs. The Centre, which had committeed to compensate the states for any Vat-induced revenue loss, will make monthly provisional release of amounts. Verifications could be done once or twice in a year, if there were major discrepancies, he added.
The empowered committee of state finance ministers would meet here on Saturday to take stock of the Vat experience in terms of implementaion, price movements and issues relating to compensation.The Centre is yet to take a final view on the central sales tax (CST) on inter-state transactions, which is collected and appropriated by states. Admitting that CST, being an origin-based tax is a “misfit” in the Vat regime, the official said any “CST reform” would probably have to wait until the compurterised system (Tinexys) for tracking inter-state transactions became fully functional. As per the plan, Tinexys would be fully operational by March 31, 2006.”CST has a distorting effect on the Vat system. But its reform and intergration into the Vat system would be possible only if a credible system for tracking inter-state trade is in place,” the official said.
Finance minister P Chidambaram had earlier indicated that CST which is levied at the rate of 4% now would be halved to 2% in 06-07 and removed totally beignning April 1 2007.
More: financialexpress.com