Vat Design At Dec 1 Meet
The design for the value added tax (VAT) regime, to be implemented from April 1, 2002, will be finalised by the states at a meeting on December 1.
Sources said that the empowered committee of state finance ministers is meeting on December 1 to discuss the VAT design and take a final view in this regard so that a model law on this could be prepared at the earliest.
They said that the state finance ministers will also take a finalise views on the rate structure to be implemented under the VAT regime. A majority of the states are favouring the adoption of a three rate structure already, in place for the sales tax in the form of uniform floor rates.
Some states have, however, shown eagerness to adopt a single rate VAT structure. Experts feel that in a developing country like India, a single rate will be difficult to implement as the rate will be on the higher side.
In comparison, the three rate structure allows to have a low rate for essential commodities and higher rate for luxury items, and is followed in majority of the countries having VAT regime.
The committee of state finance secretaries have already submitted their recommendations on reduction of the central sales tax (CST).
Member secretary of the empowered committee, Mahesh Purohit, said that the state finance ministers are currently studying the recommendations of the respective finance secretaries on CST. He said that the recommendations will be sent to the Union finance ministry for approval.
The committee of state finance secretaries has ratified the two-phase CST reduction plan suggested by the National Institute of Public Finance and Policy (NIPFP). It has suggested that the Central government provide Rs 2,250 crore per annum to the states from the next financial year as compensation for revenue losses on account of the proposed reduction in Central Sales Tax (CST) from 4 to 3 per cent from April 1, 2001.
The compensation, in the beginning, will be available for three years. The states may ask for an extension for another three years. rs if the steps to be taken by them for additional revenue generation fail to generate adequate amounts.
The committee of finance secretaries has also said that the filing of