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Thursday, Mar 24, 2005

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National

VAT panel to meet today

By Our Special Correspondent

NEW DELHI, MARCH 23. In a last-ditch effort to ensure the implementation of the new Value Added Tax (VAT) from April 1 as scheduled, the Empowered Committee of State Finance Ministers headed by Asim Dasgupta of West Bengal is meeting here on Thursday to placate Uttar Pradesh and five BJP-ruled States to come on board and switch over to the new tax regime.

The Empowered Committee meeting, according to informed sources, will also be attended by the Finance Minister, P. Chidambaram. Thus far, while assuring total compensation to the States for any revenue loss incurred during the first year of implementation of VAT, the Finance Minister has noted that the new regime will be implemented from April 1, 2005, even if some States decide to opt out.

Reiterating the same sentiment in recent days was the Secretary of the Empowered Committee on VAT, Ramesh Chandra, when the five BJP-ruled States — Rajasthan, Gujarat, Madhya Pradesh, Chhattisgarh and Jharkhand — announced their decision to stay out of the new tax regime for the time being.

PIL petition

However, even as the exercise in persuasion is being set in motion, the issue has taken a further turn with the former Finance Minister of West Bengal and Mr. Dasgupta's predecessor, Ashok Mitra, filing a public interest litigation petition (PIL) against the implementation of the VAT regime. This development, in particular, puts yet another question mark on the implementation of VAT from the first day of the new fiscal year.

The main hitch in VAT implementation, it is apparent, is the opposition by the trading community. Although most of the States, barring U.P., Tamil Nadu and Jharkhand, are ready with their legislation on VAT, the BJP-ruled States have chosen to fall in line with the traders and are seeking a clear-cut roadmap from the Centre on phasing out the Central Sales Tax (CST).

On his part, Mr. Dasgupta, as the Empowered Committee Convener, has already done the needful for switching over to the new tax regime, which is expected to be transparent compared to the existing system of multiple State taxes.

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