Tuesday, August 16 2005 13:48 Hrs (IST) - World Time -

New Delhi: VAT system has no adverse impact on consumer prices, and revenue earnings under the new regime have shot up by 15.3 per cent during the first quarter of the current fiscal, Finance Minister P Chidambaram told the Rajya Sabha today (Aug 16, 2005).

Replying to supplementaries during Question Hour, the Minister said studies by trade bodies have shown that introduction of VAT has no adverse effect on prices in the country and both the Wholesale Price Index and the Consumer Price Index have come down to under 4 per cent.

While WPI at 3.84 per cent is the lowest in two years, the Consumer Price Index has been veering around 3 to 3.5 per cent, Chidambaram said.

To a query, the Finance Minister said the rate of increase or decrease in tax revenues after introduction of VAT depended on corresponding sales tax rate that prevailed before introduction of the new tax regime.

The Minister said no conclusion can be reached about effects of VAT based on the first quarter results.

He said compensation would be provided by the Centre to revenue loss making States at the rate of 100 per cent in the first year, 75 per cent in the second year and 50 per cent in the third year.

To a query on delay on the part of UP and Gujarat in implementing VAT, Chidambaram said he was hopeful they would be persuaded to switch over to the new regime.

The Minister said he and Chairman of the Empowered Committee on VAT Asim Das Gupta were willing to meet UP Chief Minister Mulayam Singh Yadav and Gujarat Chief Minister Narendra Modi at any place to discuss the issue.