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Twenty States/Union Territories have implemented VAT with effect from 1st April, 2005. In addition, State of Haryana implemented VAT system w.e.f. 1st April 2003. These States/UTs have issued the necessary notifications to this effect. However, States which have not yet implemented VAT have not issued the required notifications. No information is available with the Central Government on implementation of VAT by different States retrospectively.
Under the VAT regime, cascading of taxes is eliminated by providing input tax credit leading to less tax burden, which means VAT should not lead to increase in prices. This is also corroborated by the international experience.
VAT presently being implemented by the States is a State subject. Hence, any decision regarding measures to be taken to bring consensus among the traders is to be taken by the States.
The Empowered Committee of State Finance Ministers, which is a representative body of all States has fixed the rates of tax under the VAT system as 1 per cent, 4 per cent and 12.5 per cent. In addition certain goods will be exempt from tax under the VAT system.
It has been decided by the Empowered Committee that under the exempted category there will be about 46 commodities comprising natural and unprocessed products, items which are legally barred from taxation and items which have social implications. Gold, Silver, bullion, precious stones etc. shall attract 1 per cent rate of VAT. Under 4 per cent VAT category, about 270 commodities will be there, comprising items of basic necessities, all agricultural and industrial inputs, capital goods and declared goods. The remaining commodities shall fall under the general rate of VAT of 12.5 per cent.
Although uniformity in rates of tax under the VAT System across the country is desirable, the question of advising the State Governments to maintain uniformity particularly for items under 4 per cent and exempted category does not arise as VAT is a State subject.
This information was given by Shri S.S. Palanimanickam, Minister of State for Finance in reply to seperate questions raised by Shri Rajkumar Dhoot; Shri Janeshwar Mishra & Shri Pyarelal Khandelwal; Shri Datta meghe, Shri Raj Mohinder Singh Majitha & Dr. Murli Manohar Joshi; and Smt. Kamla Manhar in Rajya Sabha today.
BSC/BY/CS-199/05
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