'Some states out of VAT for political reasons'

BANGALORE: Karnataka today rolled into the value-added tax (VAT) system with a lot of song and dance. Speaking at the colourful official launch ceremony, the state’s deputy chief minister and finance minister Siddaramaiah said that the decision of states like Tamil Nadu and Rajasthan to abstain from joining the VAT bandwagon had a lot to do with political connotations and had no economic justification.

“These states had not protested to the empowered committee which was in force even during th tenure of Jaswant Singh and Yashwant Sinha. VAT is better than the sales tax levied by many states according to many economists and industrialists,� he added.

The only excuse being given is that Uttar Pradesh is not coming on board, though it must be remembered that UP didn’t agree with the empowered committee’s recommendation though others like Rajasthan and Gujarat agreed for a roll-out. He said that Karnataka could have taken a call like that of Gujarat(in not migrating to VAT) thanks to the robust tax collections in FY 2004-05.

“We have seen collections rise by 27% placing us at the number 1 slot, but we chose to migrate to VAT knowing the benefits. Honest tax payers would have no problems. We will not harass the honest tax payer. 130 nations have a VAT system in place,� he said.

While acknowledging that the roll-out wouldn’t be smooth, Mr Siddaramaiah said that the state intended to have committees set up both in the capital and district headquarters to oversee the roll-out.