Govt unveils white paper on VAT

West Bengal Finance Minister and VAT Empowered Committee panel chairman Asim Dasgupta said more than 550 items would be covered under the new tax regime, of which 46 natural and unprocessed local products would be exempt from VAT.

About 270 items, including drugs and medicines, all agricultural and industrial inputs, capital goods and declared goods would attract 4 per cent VAT. The remaining items would attract 12.5 per cent VAT, while precious metals like gold and bullion would be taxed at 1 per cent. Petrol and diesel would be kept out of the new tax regime, which covers only marketable items, Dasgupta said. The panel was yet to take a view on CNG, he added.

Following opposition from some states, it has been decided that states would have the option to either levy 4 per cent or totally exempt food grains. But this decision would be reviewed after a year. Three items — sugar, textile and tobacco — covered under additional excise duties, will not be putunder VAT regime for one year.

The VAT panel, in the White Paper, has relaxed the threshold limit for traders coming under VAT regime from Rs 5 lakh-Rs 50 lakh turnover from the previous limits of Rs 5 lakh-40 lakh. Traders within this limit can pay a composite VAT rate of 1 per cent but would not be entitled to input tax credit.

Chidambaram encouraged all states to implement the new tax regime promising on behalf of the Centre full cooperation on compensation, building a computer network system and solution of all technical problems. States would get 100 per cent compensation for revenue loss, if any, in the first year, while 75 per cent losses would be compensated in the second year and 50 per cent in third year.

The central sales tax of 4 per cent, which yields Rs 15,000 crore to states, would be phased out after April 2006. ‘‘In a way VAT is no different from excise duty and in course of time, it is our dream to move onto goods & services tax (GST) in future,’’ Chidambaram said.