State Assembly to clear VAT in winter session

MUMBAI: The forthcoming winter session of the Maharashtra Assembly, which will begin at Nagpur on December 11, is all set to clear the decks for the introduction of VAT, which is scheduled to come into force from April 1, 2003.
The state government had, a month ago, submitted a draft of the bill to the President for his approval. “We expect the presidential assent any time,� sources from the government told ET. Earlier, the state government amended the Bombay Sales Tax Act, 1959, to give effect to the decision regarding uniform floor rates.
VAT is a multi-point tax system where taxes paid at one stage of production and sale get set off or rebated at the next stage. This avoids the problem of cascading taxes, where the same item is taxed several times through the production chain.
The draft of the proposed Maharashtra Value Added Sales Tax Act, 2002, says, the government shall create an independent commissioner and the tribunal for “the proper discharge of the functions conferred on it by or under this Act�.
The proposed tribunal and the commissioner shall have all the powers of a civil court for the purpose of determining proof of facts by affidavit; summoning and enforcing the attendance of any person and examining him on oath or affirmation; compelling the production of documents; and issuing commissions for the examination.
In ’95, finance ministers of India’s major states formed a committee to reform sales tax. The committee set ’01 as the deadline for all states to switch to VAT. However, for a variety of reasons, state after state refused to switch over to the new regime. Andhra Pradesh and Kerala withdrew the tax and reverted to sales tax. Subsequently, Tamil Nadu, which wanted to introduce VAT in ’96, postponed its introduction in the state twice after meeting with resistance from traders. Maharashtra, too, followed suit and deferred the implementation of VAT.
Maharashtra, in the past too, had announced its decision to introduce in phases, a full and comprehensive VAT. The first steps were taken in October ’95. In the next three years, the coverage was extended by including an additional number of dealers under the system. In April ’99, the then government announced its decision to abolish VAT and return to the single point first stage system alongwith turnover tax and surcharge in addition to basic sales tax.
“This time we are prepared to switch over to VAT regime,� a senior functionary of the state said.
However, the World Bank has cautioned Maharashtra on VAT. Referring to the state’s fiscal deterioration, the Bank has pointed out that Maharashra’s declining tax revenue to GSDP ratio is due to a spate of factors which includes a botched bid to introduce VAT.