Thursday, March 24 2005 13:07 Hrs (IST) - World Time -

New Delhi: With 21 States agreeing to switch over to Value-Added Tax (VAT) from April, Finance Minister P Chidambaram today (Mar 24, 2005) asked the remaining States, including Uttar Pradesh and Bharatiya Janata Party (BJP)-ruled ones, to implement it and add a historic dimension to Centre-State relationship.

"According to the Empowered Committee chairman (Asim Dasgupta), 21 States have agreed to implement VAT from April and others have to follow," he said in New Delhi addressing the State Finance Ministers.

"It is a historic opportunity for States to add a new dimension to Centre-State relationship where an Empowered Committee is really setting the agenda," he said.

The Empowered Committee on VAT, headed by West Bengal Finance Minister Asim Dasgupta, has already held a series of discussions and prepared the groundwork for implementation of a transparent tax system aimed at curbing cascading effects of multiple taxes in States.

Asserting that the Centre was only an "observer and co-operator" and not imposing anything on States, Chidambaram said, "I am confident that a vast majority of States will implement VAT."

"I urge the State Finance Ministers not to miss this opportunity but to continue with the roadmap drawn by them," Chidambaram said.

This appeal, a week before the deadline for VAT, comes in the backdrop of State-level VAT implementation being deferred at least four times for several reasons and in view of reluctance of Uttar Pradesh and BJP-ruled States like Rajasthan, Madhya Pradesh, Chattisgarh, Gujarat and Jharkhand.

Most of the States are ready with their VAT legislations either in the form of a Bill or ordinance.

"I am happy that State Finance Ministers have promptly committed themselves to implement VAT," he said noting the Empowered Committee had 89 sittings in the last four years.

"VAT is your law, it is your tax... and you have taken a decision to implement it from April," he said referring to the VAT committee's commitment and the White Paper issued in this regard.

The Finance Ministry has so far accepted a vast majority of the Empowered Committee's proposals including compensation package for any revenue loss, continuing with 4 per cent Central Sales Tax and revision in VAT rates and threshold limits.

Chidambaram had agreed to fully compensate States in the first year of implementing VAT, 75 per cent in the second year and 50 per cent in the subsequent year.

Coming under pressure from traders and State Governments, the VAT committee had relaxed the rules to a great extent by increasing the limit to Rs 5-50 lakh for a trader to come under VAT. States have also been given the option to raise the lower limit to Rs 10 lakh.