Saturday, April 16 2005 19:03 Hrs (IST) - World Time -

New Delhi: States will be given flexibility to levy different (Value Added Tax) VAT rates on some items but there will be uniformity in tax rates of most items, Empowered Committee chairman Asim Dasgupta said today (Apr 16, 2005).

The VAT panel will again meet on April 25-26 to resolve amicably the problems raced by States, including the variations in VAT rates and unjustified rise in prices of some items, he said, after four-hour long meeting of State Finance Ministers in New Delhi.

Dasgupta will also visit the eight States, Uttar Pradesh, Tamil Nadu, Uttaranchal, Rajasthan, Gujarat, Madhya Pradesh, Jharkhand and Chattisgarh, for persuading them to join the VAT regime.

"Twenty-one States introduced VAT and they remain firm in the implementation process.

There are about eight States, which have not switched to VAT but may be in the final stages. We will visit all these States and request them to join us,"

Dasgupta said, adding all the States were together when VAT panel was formed to introduce the tax reform.

Admitting that there was initial hiccups, he said, "130 countries have introduced VAT and the initial teething problems was much more intense there, we are confident in resolving the issue in the interest of the consumers."

Problems pertaining to variations in VAT rates and rise in prices of some items is expected be resolved by this month (April).

"We have received complaints of variations in VAT rates across States, We want to come to a convergence among ourselves.

When a new tax system is introduced, there is bound to be variations. But it can be settled," he said, adding "We will strike a balance between uniformity and flexibility in VAT rates."

Dasgupta said that there was "total consensus" among States on the VAT rates but wherever there are variations, it would be sorted out by this month end.

"In our federal structure, the basic feature of VAT is common. But there will be some reasonable federal flexibility. We will strike a balance. It's not an easy job. But we will do it," he said.

Apart from VAT rates, the panel will also look into reasons for price rise in certain items and complaints against companies flouting VAT rules, he said.

"In certain commodities, there has been price rise which was not justified under VAT regime. Complaints against large manufacturers, who have not passed on the VAT benefits, have also been received," Dasgupta said.

State Government will again explain the VAT rates to traders and manufacturers so as to ensure that prices come down to the level possible, he said.

The Empowered Committee in its next meeting will also resolve the differences between States on the issue of minimum floor tax rate on diesel and other petroleum products.

Some States have imposed tax rate on diesel at lower rate instead of the floor rate of 20 per cent envisaged by the Empowered Committee earlier.

However, Dasgupta said that petroleum products will be out of VAT, since their prices are not totally market determined.

"Petroleum products are still out of VAT. There will be no deviation. The reason why petroleum products have been kept out of VAT is that they are not marketable commodity and falls under administered price mechanism," he said.