Sunday, April 3 2005 13:50 Hrs (IST) - World Time -

New Delhi: The Empowered Committee is likely to extend the list of items coming under Value Added Tax (VAT) regime from 550 to 2,000 so as to remove anomalies and bring in uniformity across States.

The move assumes importance, as it will make classification of items proper and give a clear picture of impact of VAT on prices of various commodities. Though the VAT White Paper released on January 17 refers to about 550 items coming under VAT, some of the industrially developed States like Maharashtra and Haryana already classify over 1,000 items as industrial inputs and outputs.

State Government sources said that the figure in White Paper is "incorrect". Confederation of All India Traders (CAIT) has also pointed to discrepancies in VAT list and rates of various States that have passed the VAT bills.

When contacted, VAT panel secretary Ramesh Chandra admitted that there was confusion on the VAT list among States.

"There will be about 2,000 items under VAT," he said today (Apr 3, 2005) and added that HSN classification used by Commerce and Finance Ministry will be adopted to classify various items under VAT.

The number of items coming under 0, 1 and 4 per cent VAT will remain intact, while all other items would fall in the 12.5 per cent tax bracket, Chandra said.

According to the White Paper on VAT, 46 natural and unprocessed local products are exempt from VAT.

About 270 items including drugs and medicines, all agri and industrial inputs, capital goods and declared goods would attract 4 per cent VAT. Precious metals like gold and bullion would be taxed at 1 per cent.

States will have the option of exempting grains from VAT or levy 4 per cent tax in the first year of VAT regime, while tea-producing States would be given an option to levy 12.5 per cent or 4 per cent. In both cases, the tax rate would be reviewed in 2006.

Remaining items would attract 12.5 per cent VAT, Chandra said without hazarding a guess on the number of items that can fall under this bracket.

The VAT panel is expected to meet after June to review the VAT rates to fine-tune the new tax reform further and remove discrepancies.

Moreover, categorising VAT items under HSN classification would bring uniformity among the State-level VAT rates and the central taxes like excise and customs.

This will also facilitate easy switch over to a single national VAT or Goods & Service Tax at a later stage.