VAT damages to states may be clipped
VAT damages to states may be clipped
Compensation to states for losses under value-added tax for 2006-07 can be pegged marginally lower at around Rs 4,000 crore.
The lower compensation is because the outgo on account of compensation to states and Union Territories in 2005-06 is now expected to be lower at around Rs 3,000 crore against a provision of Rs 5,100 crore for 2005-06.
Also, from the next fiscal, compensation to states will be only for 75 per cent of the losses incurred against 100 per cent compensation this year. Barring Uttar Pradesh, Tamil Nadu, Madhya Pradesh, Gujarat, Rajasthan, Chhattisgarh and Jharkhand, all other states have imposed the VAT.
For phasing out the 4 per cent central sales tax — the process to start in the next fiscal — the finance ministry is awaiting final recommendations from the state empowered committee set up to look into the issue of compensation.
A proposal for 100 per cent cash compensation mooted by the committee has not found favour with the finance ministry. The issue is expected to be taken up by the committee at its next meeting on January 30.
More: business-standard.com