Rajasthan govt still not ready with VAT Bill

JAIPUR: The Rajasthan state government is not yet ready with a Bill for the introduction of VAT despite preparation made by the commercial taxes department. The state government is supposed to enact a law before VAT is put into operation from April.
But sources said introduction of VAT would entail several considerations which have serious implications for the finances of the state. Most important of these issues is whether the Union government would concede to the demand of majority of the states for the abolition of central sales tax (CST). There are, however, some state governments who are opposed to the abolition of CST. These are states whose manufacturing base is quite strong.
Rajasthan belongs to the category of states where the manufacturing base is weak. So, it has joined hands with about 20 other states demanding the abolition of CST as a prelude for the introduction of VAT.
The state government is also concerned over the fact that the introduction of VAT would mean reduction in revenue substantially — a risk which it can ill afford in view of its financial position.
The Rajasthan government, as some other states, has, therefore, asked the Centre to compensate the loss. There is, however, no indication from the Centre that it would compensate the state governments. Rajasthan has taken up the matter with the finance ministry and has put up a proposal that to make up for the shortfall in the collection of revenue, the state governments should be vested with the right to tax services.
The issue pertaining to the introduction of VAT has spilled over to the centre. Much would depend how the centre reacts to the suggestions made by several states, including Rajasthan.
The commercial taxes department in Rajasthan had taken a lead in the preparation of VAT. Even several state governments had taken keen interest in the model prepared by the state government for the implementation of VAT through IT-enabled services.