VAT panel norm for inputs
The Empowered Committee of State Finance Ministers on Valut Added Tax (VAT) has decided that items which have at least 50 per cent industrial use will attract 4 per cent tax rate for that particular use.
Such items will be treated as industrial raw material and four per cent VAT on them for that particular use will not be taken as a deviation, the Empowered Committee Secretary, Ramesh Chandra, told PTI.
Had it been taken as deviation, States would not have been entitled to compensation in case they lose revenue owing to VAT for these items, Mr. Chandra explained. It would be entirely the States’ prerogative to certify items falling under this category, he said.
All inputs attract 4 per cent VAT rate, while final products draw 12.5 per cent rate.
The committee, at its recent meeting with chambers and trade bodies, also clarified that job work would not attract any VAT since it does not amount to sale. On the harmonised system of nomenclature (HSN) for items falling under VAT, an Empowered Committee official said further interaction with States was needed.
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7/14/2005
Delhi Govt. reduces VAT on many household items
The Delhi Government today drastically reduced VAT on a number of household items, including packaged yogurt and milk and plastic items, which will now be taxed at four per cent instead of 12.5 per cent.
It has also decided that certain items such as spare parts of agricultural implements will attract no tax.
A large number of items, which were earlier unscheduled and hence attracted a 12.5 per cent VAT, have now been brought under Schedule three and hence will now be taxed at four per cent.
Among the items that will now attract a four per cent tax are packaged flavoured milk and yogurt, unbranded toffees, textile fabrics not covered under any other schedule, household plastic items and fittings for doors and windows.
Welding equipment, glues and adhesives, chemicals used in electroplating, lay-flat tubing, which is used for manufacture of plastic bags by small traders, coated abrasives, kites etc will also now be taxed at four per cent.
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Reluctant States appear to be rethinking on VAT
With resistance to Value Added Tax by the trading community receding, some of the reluctant States like Uttar Pradesh and Uttaranchal appear to be rethinking on switching over to the new tax regime.
“We were never opposed to VAT in-principle. Resistance of traders against VAT has lessened,” Uttar Pradesh Agriculture Minister Ashok Bajpai, who represents the State in the VAT panel, said.
He, however, said the State would introduce VAT only when traders in large numbers come out in support of the new tax system.
Bajpai attributed the lessening of the resistance of trading community against VAT to the success of the new tax system in 21 States. “Traders had apprehensions against VAT, some of which have been removed by the progress of VAT in 21 States,” he said.
Refusing to give any time-frame for implementing VAT in his State, he said the outcome of the meeting with Uttar Pradesh Chief Minister Mulayam Singh Yadav, with VAT panel has to be watched in this respect.
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7/12/2005
States to get monthly compensation for VAT
In what has come as a major relief to States such as Andhra Pradesh and Maharashtra, the Centre on Saturday agreed to pay a monthly `ad hoc’ compensation in case their revenue from the Value Added Tax (VAT) fell short of their projections on the basis of collections in earlier years through the erstwhile sales tax regime.
“We discussed in detail the method of compensation in case any State loses revenue in contrast to the trend rate of growth. The Finance Ministry has come out with a simpler method,” the Chairman of the Empowered Committee on VAT, Asim Dasgupta, told newspersons after the review meeting with the State Finance Ministers here.
As per the new formula, the Finance Ministry, Dr. Dasgupta said, would release ad hoc funds each month to those States which declare that they have suffered a revenue loss on account of implementation of the new tax regime. The relief package given by the Centre each month is to be reconciled later after receiving the quarterly reports on the revenue collections from the State Auditor Generals (AGs).
The essential difference is that earlier, the Centre had insisted that the compensation to be paid to the States would be on the basis of reports of AGs. However, this has been relaxed as the tax collection figures are available with the AGs only at the end of each quarter. However, to receive the compensation on a monthly basis, the States will have to inform the Finance Ministry about the collections from VAT each month.
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7/11/2005
States see 12% growth in VAT, prices slide for most items
States have clocked 12 per cent growth in revenue during the first quarter of 2005-06 after the implementation of Value Added Tax, which has improved compliance among traders and lowered prices of most items.
Reviewing the new tax regime after three months, Chairman of the Empowered Committee on VAT, Asim Dasgupta, said “implementation of state level VAT in first three months is quite satisfactory. This is shown in the number of registered dealers and also the growth in VAT revenue.
“In June, the overall revenue growth was over 15 per cent. Many states witnessed over 20 per cent growth while some recorded 30 per cent,” he said.
During April-June, the growth in tax collection was about 12 per cent, VAT Panel Secretary Ramesh Chandra, said.
Only a handful of States like Andhra Pradesh and Maharashtra witnessed lower growth in VAT during April-June 2005-06 when compared to the same period last fiscal. The picture is different in states like Delhi which posted over 30 per cent growth.
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VAT a step towards common tax system: CII
The Confederation of Indian Industry believes that the value-added tax (VAT) system that most States have switched over to is only an intermediate stage and the ultimate objective should be to have a single, common, harmonised system of taxation throughout the country.
Addressing a press conference here on Thursday, Y.C. Deveshwar, CII President, said the chamber was in favour of a single goods and services tax.
A uniform tax system would help establish a common market within the country and help industry reap the advantages of economies of scale that such a large market presented.
To a question, R. Seshasayee, Vice-President, CII, hoped that the Tamil Nadu Government would switch over to VAT at the earliest. (Tamil Nadu is among the handful of States that have not moved to the new system.) The State could not be an island when all others around it have moved to VAT. Though there was no immediate impact of not switching over to VAT, in the long term, there would be some impact.
It was a “mixed situation,” he said, in response to a question on the impact of VAT that came into effect from April 1, 2005.
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7/7/2005
Tax revenue in Kerala goes up with VAT
Tax revenue in Kerala has risen by six percent in the first quarter of the fiscal compared to the corresponding period last year with the introduction of VAT, state Finance Minister Vakkom Purushothaman said today.
In a written reply to a question in the assembly, he said tax collection was up by Rs 73 crore in the period between April and June this year.
While tax collection in the state totalled Rs 1136.33 crore in the period in 2004, the earnings this year was Rs 1209.33 crore, he said.
Since the introduction of VAT, tax revenue came down by five percent only in the month of May. While Rs 518.41 crore was collected in May last year, only Rs 492.46 crore could be collected in the month this year.
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7/6/2005
VAT collections show mixed picture
The initial collection trends during the first few months of the new Value Added Tax (VAT) regime indicate that States that are primarily consuming regions with no great manufacturing activities to show are seeing robust increase in tax receipts.
This trend is, however, not visible in manufacturing and export-intensive States, reckon some of the tax experts.
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VAT panel to meet on July 9
mpowered Committee on value added tax will meet on Saturday to take up the issues arising after three months of implementation of the new tax system by 21 states, including compensation formula for any losses incurred by states due to VAT.
“We will meet on July 9 to discuss implementation issues relating to VAT,” Empowered Committee member secretary Ramesh Chandra said.
To a query on reported inability by states to comply with the directive of VAT panel to provide commodity-wise revenue collection data to calculate the compensation package, Ramesh Chandra said no state has told him so.
Though it may be difficult to provide commodity-wise revenue collection data, it is always possible to have classification-based data, he said.
“There may be a number of commodities, say in grocery, and to provide for revenue data for each commodity may be difficult task. But such data for grocery can be provided,” the VAT panel secretary said.
Besides compensation formula, impact of new tax system on prices and ways to make VAT more consumer-friendly would also be discussed, he said.
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6/29/2005
Traders meet to discuss impact of VAT
Traders from across the country will meet here for a two-day meeting starting on July 21 to discuss the impact of Value Added Tax and imposition of service tax on them.
Terming that domestic trade was facing a “trauma” in the wake of VAT and service tax, the Confederation of All India Traders, which is organising the meeting, said in a statement that they would also discuss issues like FDI in retail, merger of banks and other policies of the Centre and states relating to trade.
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