MoF says new roadmap likely for VAT, talks on with political parties

NEW DELHI: The June 1 deadline for a host of states to implement VAT remains elusive. After distancing itself from VAT, the finance ministry has finally said that a new roadmap would be drawn up for introduction of VAT in consultation with principal political parties and the empowered committee.
Northern states led by Delhi backed off from implementing VAT due to the impending Assembly polls and pressure from traders who do not want to come under the tax net.
Besides Delhi, polls are due in Rajasthan, Chattisgarh and Madhya Pradesh.
Congress-ruled Madhya Pradesh, which received presidential assent to the VAT bill in ’02, is also willing to join the VAT bandwagon. So are the southern states, Maharashtra, West Bengal and Gujarat.
While 15 states have agreed to implement VAT, the ministry has only received draft amendments from West Bengal so as to bring the legislation in line with latest set of decisions taken by the Empowered Committeee. Maharashtra, Andhra Pradesh and Karnataka have conveyed their willingness to have the amendments legislated. So even if the June 1 deadline is not met, it appears that a few states may go ahead with the introduction of VAT after completing the consultation process with principal political parties and amending their legislation to conform to the decisions taken by the Empowered Committee.
The finance ministry, on its part, has again made it clear that states will have to incorporate the latest set of recommendations of the empowered committee in their respecive VAT bills to pave the way for its introduction simultaneously in all major states from all regions of the country. The latest decisions of the Empowered Committee relate to definitions, self-assessment, classification of commodities to be subject to specific rates of VAT, higher threshold limit for registration of dealers, input tax credit in various situations.
The statement issued by the finance ministry is, however, silent on the issue of support if a few states go ahead with the implementation of VAT.
The Centre has committed a 100% compensation for states on account of loses arising due to transition to VAT in the first year, 75% in the second year and 50% in the third year.