Thursday, March 31 2005 22:09 Hrs (IST) - World Time -

New Delhi: Unfazed by traders' agitation and reluctance of eight major States on Value-added Tax (VAT), the Empowered Committee of State Finance Ministers today (March 31, 2005) said 20 States were switching over to the new regime from tomorrow (April 1, 2005).

"20 States will implement VAT from tomorrow and whatever was decided on March 24 by the committee will be adhered to visualise no major changes till we review the tax rates after June," VAT panel's secretary Ramesh Chandra told sources in New Delhi.

"If traders believe that they can pressurise the State Governments and Empowered Committee, they are mistaken," he said ruling out postponement of VAT.

Meghalaya will join the league 4-5 days later as its VAT rules have not been finalised, he said, adding Uttaranchal will opt for it if Uttar Pradesh introduces the tax.

Apart from these two States, seven others - Uttar Pradesh, Tamil Nadu and five BJP (Bharatiya Janata Party)-ruled States of Rajasthan, Gujarat, Madhya Pradesh, Jharkhand and Chhattisgarh have decided not to introduce VAT in the present form.

Repeated attempts made by VAT panel Chairman Asim Dasgupta failed to bring these States on the VAT platform.

Dasgupta had met top BJP leaders L K Advani and Yashwant Sinha to persuade them to reconsider their decision of not implementing VAT but to no avail.

The VAT panel chairman also had several rounds of discussion with UP Chief Minister Mulayam Singh Yadav, who stuck to his stance of not opting for VAT unless traders agree to it.

Dasgupta, who is also the West Bengal Finance Minister, was in touch with his counterpart in Tamil Nadu till the last moment to persuade the state for switching over to VAT.

While assuring full compensation for revenue loss in the first year, Finance Minister P Chidambaram had urged all the states to introduce VAT from April 1.

The VAT panel has doubled the exemption limit to Rs 10 lakh for a trader to come under VAT net and reduced the tax rate from 1 to 0.25 per cent for small traders.

States have also been given the option to exempt foodgrains from VAT. Chandra said there would be no major changes from what has already been announced. Although the eight states have opted out, tax experts said that investment and trade will shift out of these states to those who implement the VAT regime.

Senior officials in the Finance Ministry, Planning Commission, World Bank and IMF said that VAT was beneficial for states as it will check tax evasion and lead to revenue buoyancy.

Despite the developments, traders are continuing their three-day strike tomorrow and will observe April 1 as "black day".

Reacting to the agitation of traders, Chandra said, "Do you think State Finance Ministers are not sensible and only traders are sensible."

"The strike has totally failed and whereever it is successful, it is because of fear and not conviction," he said, adding the VAT panel was open to dialogue with traders on "sensible issues".