Plan Size For Bihar, Pondicherry Likely To Be Pruned By 25%

The Plan size for Bihar and Pondicherry may get pruned by 25 per cent for non-compliance to introduction of uniform sales tax rate. Both the states were told to comply to uniform sales tax rate within seven days to avoid any deduction in the plan size, minister of state for finance Dhananjay Kumar told reporters after the second meeting of the all state finance ministers.

Kumar said apart from these two states, all other states have showed compliance to the lower and uniform tax rate. These two states had apprehensions that such a move would lead to a lower revenue generation. Kumar said states and Union Territories have not incurred loss in revenue after implementing uniform sales tax rate. They have, in fact, realised an increase in revenue, he added.

 

The idea of cutting the state Plans size for non-compliance was mooted by West Bengal finance minister Ashim Dasgupta and attained consensus, Kumar said.

Speaking at the meeting of the Standing Committee of state finance ministers for monitoring sales tax reforms, finance minister Yashwant Sinha said since majority of states have implemented the uniform sales tax rate, the remaining states should do the same.

Sinha said many states which had lowered the sales tax rate have, in fact, benefited by way of higher floor rates for certain items.

Sinha said non-implementation of by one state would lead to problems for the neighbouring states. Tax reforms would help both the Centre and the states considering the fact that combined fiscal deficit of the Centre and states has touched 10 per cent of the gross domestic product, one of the highest in the world, he added.

Kumar said Bihar finance minister's argument for non-compliance because of formation of the new state government did not hold ground as Haryana with a new government implemented the uniform sales tax rate.

Kumar said there would be a conference of state Chief Ministers on June 22 to review the progress of introducing single value added tax regime by April 2001.

The states would be given required assistance for computerisation of tax departments for shifting to single value added tax regime. Benefit of VAT lies in taping every source of taxable income, Kumar said.

Kumar said the Centre would also hold separate meeting of the regional states for taking care of minor deviations in uniform sales tax rate.

Meanwhile, minister of state for divestment Arun Jaitley on Friday said the government should rope in a strategic partner for the divestment of Vizag Steel Plant. He said the divestment decision of Vizag Steel Plant has been deferred and would be taken up after four weeks.

TDP leader Yeren Naidu said the Centre should make a detailed study on the number of loss-making public sector undertakings before taking up the divestment programme.