Uniform CST of 2% from April '06

NEW DELHI: The government has decided to issue a notification on the implementation of a uniform central sales tax (CST) of 2% with effect from April next year, and completion of the task of classifying items under the uniform value-added tax(VAT) by July this year.

Announcing this at a seminar on ‘State VAT for a Common Indian Market’, organised jointly by Assocham and the Gurgaon Chamber of Commerce and Industry (GCCI), Ramesh Chandra, member-secretary, empowered committee of state finance ministers, said a formal notification to this effect would be issued on May 26.

He said that the CST would be further brought down to 1% with effect from April 2007. Thereafter, the government would attempt to completely abolish the CST, though he did not specify a timeframe for it.

He said that distortions surfacing in the current VAT slabs would also be narrowed down beginning July this year for which the empowered committee will hold a series of meetings to evolve a consensus.

Citing reasons for the July deadline for the completion of the task of classifying items under the uniform VAT rate, Mr Chandra said that by then the empowered committee would have a fair idea about the revenue collections of all the state governments including that of the Centre for the first quarter of the current fiscal.

He advised the trading community to make use of computer-generated invoices based on sound tax information system to avoid severe penalties in case of non-compliance.

“I am personally against prescription of severe penalties. However, the empowered committee will take serious cognisance of the violations of the norms it has prescribed for traders,� said Mr Chandra.

He also cautioned the state governments, which have implemented VAT, not to impose entry tax on movements of goods from one state to another as the finance ministers in their last meeting in Delhi had agreed to scrap entry tax. States which still impose entry tax are violating the consensus decision of the empowered committee, he added.