VAT panel to meet on May 5 to iron out creases

NEW DELHI: The VAT juggernaut seems set to roll on June 1, even though the Centre has distanced itself from the patchwork implementation of the regime, saying it is not a feasible exercise.
The empowered committee of state finance ministers said, on its part, that 16 states that have agreed on adoption of value-added tax (VAT) would stick to the 1 June deadline for ushering in the new regime, anyhow. The committee will meet Jaswant Singh over this week and meet again on May 5.
After a two-day meeting here, chairman of the VAT panel and West Bengal finance minister Asim Dasgupta said: “We have worked out in detail the features of immediate concern that are to be shared by the 16 states switching over to VAT from 1 June.�
The remaining issues would be sorted out during the committee’s next meeting slated for 5 May, he added. While there would no going back on VAT features that were agreed upon in today’s meeting, it is felt that there should be flexibility with regard to certain concerns expressed by states with “special characteristics.�
The required flexibility would be provided to these states, without disturbing the VAT structure, Mr Dasgupta said. The empowered committee would meet Mr Jaswant Singh in the first week of
May to make its positions clear on the compensation expected from the Centre in case of
revenue losses to states due to VAT adoption.
Mr Dasgupta refused to comment on Mr Singh’s differences with the empowered committee on the “preparedness� of states to implement VAT from 1 June.
It is understood that notwithstanding the Centre’s apparent lack of support to some of the committee’s recent proposals for lower VAT rates on items like drugs and medicines, the committee is likely to propose exemption from VAT to foodgrains, which currently is under 4% rate meant for essential goods. States which are foodgrain deficient like Tamil Nadu which currently exempt foodgrain from sales tax or levy ST of 1-2% on the item had pitched for the exemption, informed sources told ET.
The panel would also re-define ‘capital goods’ in the context of VAT and would come out with a complete list of items to be put under revenue-neutral rate of 12.5% soon.
As regards drugs and medicines, there could only be one VAT rate, that is, 4%.
The proposal to exempt some special “life-saving drugs� from VAT might not work, sources said. However, states which would want to exempt a few drugs of their choice from VAT would be free to go ahead.