INTRODUCTION OF VALUE ADDED TAX BY STATES
Chief Ministers of States as well as their Finance Ministers
had, uptil now, repeatedly affirmed their commitment to the introduction
of VAT from April 1, 2003. However, so far the Government of India
has received the needed VAT legislations, for Presidential assent,
only from the States of Gujarat, Kerala, Maharashtra, Madhya Pradesh,
West Bengal, Andhra Pradesh and Karnataka. In respect of Madhya
Pradesh, this assent had been given as far back as November 2002.
Some Legislations from States, received during the last few days,
will be processed for Presidential assent.
However, introduction of VAT, in a patchwork
form by individual States, without corresponding action by others
is not a workable proposition. It is clear, therefore, that States
would not be able to introduce VAT by April 1, in accordance with
the commitment made by them.
It has to be reaffirmed that VAT is a progressive,
transparent and equitable commodity taxation system. It is a great
improvement on the existing sales tax system. It helps avoid tax
on tax, or any cascading of taxes through a transparent, invoice
based input tax credit. As it is based on self-assessment by the
tax payer, official interference is minimized. It has the provision
to keep small traders and dealers outside its purview. It helps
industry, and also exports, become globally more competitive.
Besides, other things being equal, it does not lead to a rise
in consumer prices. In the context of the current fiscal reforms
process, it is a necessary measure at the State level, very beneficial
for their revenues.
The Empowered Committee of State Finance Ministers,
now scheduled to meet on April 8, 2003 should, therefore, consider
the matter afresh and again unanimously decide upon the date,
with effect from which States would now be in a position to introduce
this progressive measure.
