VAT committee to meet today

The empowered committee on value-added tax (VAT) will hold a two-day meeting beginning tomorrow to discuss issues related to implementation of the new tax system, including uniform floor rate (UFR) for bullion items.

The officials, mainly tax commissioners, would meet tomorrow followed by state finance ministers the next day.

Empowered Committee Secretary Ramesh Chandra said the post-VAT implementation issues would be taken up at the meeting.

Besides UFR, tax rates on processed food items, introduction of 8 per cent tax rate and reluctance of 8 states to introduce VAT were expected to come up for discussion.

The decision taken by the VAT panel at its last meeting on July 9 could not be implemented even though the deadline of August 1 had expired.

The VAT panel had decided that all states would have to impose tax rate of at least one per cent on bullion by August 1 or face "administrative action."

Empowered committee Chairman Asim Dasgupta said the panel would recommend action against the states who did not implement the decision of the panel on UFR.

However, nature of the action is still not clear even though more than 20 days have passed since the states missed the deadline of UFR on bullion.

Delhi, which witnessed shifting of bulk of trade in bullion to Rajasthan and Gujarat because of the difference in tax structure, said it would not wait beyond August 24 for the VAT panel to take a decision in bringing parity in tax rates among states.

"We would lower tax rate on bullion to 0.25 dowm one per cent in case Rajasthan and Gujarat do not raise it to one per cent," Delhi Finance Minister A K Walia said.

Delhi had paised tax rate on bullion from 0.25 per cent to one per cent after it switched over to the VAT regime from April this fiscal.

However, Rajasthan and Gujarat still maintain sales tax on precious metals at 0.25 per cent. Both the states have not introduced the VAT regime. But they were expected to abide by the empowered committee's decisions.

Walia said Delhi would lose over Rs 40 crore in bullion trade to the two states, though traders in the Capital said the figure was grossly underestimated. Besides, deadline on other items is fast approaching as they were supposed to be implemented from September 1.

Another issue, expected to be taken up at the meeting, is that of processeed food items.

The centre would pitch for a full exemption from VAT for perishable processed food items and 1-4 per cent tax on the non-perishable items.

The VAT panel may also consider the demand for the introduction of another slab of 8 per cent in between thd two main rates of 4 per cent and 12.5 per cent.

The VAT panel sources, however, said there would be no major changes from what had already been announced. Although the VAT panel had announced the rates for over 550 items,it had kept options open for revasing some of them after June.

The panel was also expected to decide on the schedule of meeting the political leadership of 8 reluctant states to persuade them to switch over to the new tax system.