The Hindu Business Line : Some mass consumption items exempted from VAT — Consensus reached on convergence of rates

THE Empowered Committee of State Finance Ministers on VAT on Tuesday gave away fresh sweeteners to ensure smooth sailing of VAT implementation and also achieve convergence in VAT rates.

In a common man-friendly move, the committee has exempted from VAT certain items of mass consumption such as salts of all kind (branded as well as unbranded), breads of all kind (brand as well as unbranded) and also those items under the public distribution system (PDS).

The committee has also placed gur and jaggery, khadi items and few other items under the VAT exemption list.

Further, all VAT-implemented States have been directed to continuously monitor prices and ensure that there was "no artificial increase of prices of items under VAT".

In what could lead to some relief to the tea industry, the VAT panel has "requested" States to converge their VAT rates on tea to 4 per cent.

Earlier, the States were given the option of choosing between a VAT rate of 4 per cent or 12.5 per cent.

Briefing newspersons after a four-hour long meeting of the VAT panel, Dr Asim Dasgupta, Chairman of the Empowered Committee, said that consensus has been reached on the issue of convergence of VAT rates.

"We are happy to tell you that it has been possible to reach full consensus among States on convergence of VAT rates. That was the task before us and we have been able to achieve this", Dr Dasgupta told reporters.

The Empowered Committee had invited the Union Finance Minister, Mr P. Chidambaram, to "spend some time" with the State Finance Ministers during today's meeting.

Dr Dasgupta said that the VAT panel discussed the issue of compensation, for possible losses if any in VAT implementation, with the Union Finance Minister.

He also said that the Finance Ministry was expected to finalise the details of the compensation package in the coming days.

The State finance ministers also unanimously agreed that all capital goods except a small negative list (like buildings) should attract a uniform VAT rate of 4 per cent.

All States unanimously agreed that all industrial inputs would attract 4 per cent VAT.

"There was a confusion about industrial inputs and VAT rates. Some of the States did not specify the concerned items. Now all the 21 States would notify explicitly the capital goods and industrial inputs within this month ", Dr Dasgupta said.

He also said that the VAT panel was yet to come to any conclusion on exempting life saving drugs from VAT. Dr Dasgupta, however, clarified that the committee has decided that all medical equipments and devices would attract VAT rate of 4 per cent.

On the controversial issue of diesel, Dr Dasgupta said that the Empowered Committee has addressed the concern of the Delhi Government. The Delhi Finance Minister, Mr A.K. Walia, however, indicated that the Delhi Government would lower the tax rate on diesel from the current level of 20 per cent.

"We will give relief to consumers of diesel and LPG in Delhi. This has to come through reduction in tax rates. I can tell you about the extent of reduction only after tomorrow's Cabinet meeting", Mr Walia said.

Both Haryana and Punjab are understood to have made it clear to the Empowered Committee that they were not willing to raise their tax rate on diesel from their current rate of 12 per cent and 8.8 per cent respectively.

Some tax experts claimed that allowing Delhi to lower the tax rate on diesel from 20 per cent might imply that the principle of uniform floor rates is being dispensed with in the case of diesel.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Air India board chooses Boeing
50 planes to cost Rs 30,000 cr; in-principle nod for IPO

End of a decade-long wait for Air India

Left parties urge Govt not to raise petro prices

Some mass consumption items exempted from VAT — Consensus reached on convergence of rates

Resurgent India

Guwahati HC stays Shoppers' Stop IPO