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Come April 1, 2012 and States would directly start levying Value Added Tax (VAT) on sugar and textiles, as the Centre has stopped charging the additional excise duty (AED) on these items.
A unanimity was arrived at on this by the State Governments during the meeting of the Empowered Committee of State Finance Ministers, chaired by Bihar Deputy Chief Minister and Finance Minister Sushil Modi, who also heads it.
“Centre used to levy excise duty on these items and pass of a specific percentage to states as AED. However, the 13th Finance Commission had suggested to the Centre that it should do away with the AED, therefore, in today’s meeting we unanimously decided that States ould levy VAT on sugar and textiles from April 1, 2012,” Modi said.
He, however, added that despite the unanimity on the issue, it was not binding on the states to do so and each State Government was free to take a call on it.
The empowered committee was meeting for the first time after its members returned from a two-week long tour of Europe, which it had undertaken last month to study the tax structure of the European Union (EU) nations.
The panel has been trying to arrive at a consensus on how to implement the Goods and Sales Tax (GST) regime (which the Centre plans to bring into effect from April 1, 2021 onwards) and in this context it had decided to go on the study tour so that some clarity can be arrived at and the matter can be resolved.
Though Modi refused to comment whether any sort of consensus could be arrived at towards implementation of the new tax regime, he said that the experiences from the tour were discussed threadbare.
“EU has a barrier-free common market, where all the member nations are allowed to trade without restrictions. If such a system can work well there, then why can’t we adopt a similar format. We discussed ways and means of how such a format can be implemented here,” Modi said. Eurozone is an economic and monetary union of 17 EU member States, that have adopted the Euro as their common currency and is a visa-free common market.
The committee chairman added that he would be meeting Yashwant Sinha (Chairman of the Parliamentary Standing Committee on Finance and with which the GST Constitutional Amendment Bill currently is), and convey the States’ views on the proposed legislation.
Modi said that the committee also approved the formation for a special purpose vehicle (SPV) to provide IT solutions for GST roll out and the proposal would be soon be sent for Cabinet approval also.
“Unique Identification Authority of India Chairman Nandan Nilekani was also present in the meeting and we agreed on the setting up of the SPV. It was also unanimously decided that while Government would have 49 per cent equity in it, the private entity would have the majority 51 per cent stake in it,” Modi said.
The SPV, he said, would be a non-profit entity registered under the Companies Act.
The committee, however, expressed concern over the fact that States are yet to be compensated for levying the lessened Central Sales Tax (CST), and Modi said that apart from writing to the Finance Minister Pranab Mukherjee on the matter, he also plans to meet him.
Centre had asked states to levy lesser CST, however States complain that despite doing so, they are yet to be compensated for it. The Central Government should abide by its commitment made towards the states (for compensating them),” Modi said. He further informed that Prime Minister Manmohan Singh had recently written to the empowered committee proposing to keep natural gas and regasified LNG under a standard rate (bringing the items under declared goods category).
“The committee members are not in favour of this proposal and their first reaction was against it,” Modi said.
There is a uniform rate charged by the Centre for items listed under the declared goods category, however states charge a lot more on undeclared goods items. Once natural and regasified LNG are brought under the declared goods category, States would lose out on revenue and hence they are opposed to it.
The States also discussed the less than satisfactory growth in the VAT and non-VAT revenue collection during the first six months of the current fiscal compared to the same period last year, due to the economic slowdown.
“Though there is an adequate 20% growth in VAT and non-VAT revenue collection during the first six months of the current fiscal, compared to same period last year, there is a fall, especially due to inadequate motor vehicle sale, poor growth in construction sector and high petrol prices,” Modi said.
A unanimity was arrived at on this by the State Governments during the meeting of the Empowered Committee of State Finance Ministers, chaired by Bihar Deputy Chief Minister and Finance Minister Sushil Modi, who also heads it.
“Centre used to levy excise duty on these items and pass of a specific percentage to states as AED. However, the 13th Finance Commission had suggested to the Centre that it should do away with the AED, therefore, in today’s meeting we unanimously decided that States ould levy VAT on sugar and textiles from April 1, 2012,” Modi said.
He, however, added that despite the unanimity on the issue, it was not binding on the states to do so and each State Government was free to take a call on it.
The empowered committee was meeting for the first time after its members returned from a two-week long tour of Europe, which it had undertaken last month to study the tax structure of the European Union (EU) nations.
The panel has been trying to arrive at a consensus on how to implement the Goods and Sales Tax (GST) regime (which the Centre plans to bring into effect from April 1, 2021 onwards) and in this context it had decided to go on the study tour so that some clarity can be arrived at and the matter can be resolved.
Though Modi refused to comment whether any sort of consensus could be arrived at towards implementation of the new tax regime, he said that the experiences from the tour were discussed threadbare.
“EU has a barrier-free common market, where all the member nations are allowed to trade without restrictions. If such a system can work well there, then why can’t we adopt a similar format. We discussed ways and means of how such a format can be implemented here,” Modi said. Eurozone is an economic and monetary union of 17 EU member States, that have adopted the Euro as their common currency and is a visa-free common market.
The committee chairman added that he would be meeting Yashwant Sinha (Chairman of the Parliamentary Standing Committee on Finance and with which the GST Constitutional Amendment Bill currently is), and convey the States’ views on the proposed legislation.
Modi said that the committee also approved the formation for a special purpose vehicle (SPV) to provide IT solutions for GST roll out and the proposal would be soon be sent for Cabinet approval also.
“Unique Identification Authority of India Chairman Nandan Nilekani was also present in the meeting and we agreed on the setting up of the SPV. It was also unanimously decided that while Government would have 49 per cent equity in it, the private entity would have the majority 51 per cent stake in it,” Modi said.
The SPV, he said, would be a non-profit entity registered under the Companies Act.
The committee, however, expressed concern over the fact that States are yet to be compensated for levying the lessened Central Sales Tax (CST), and Modi said that apart from writing to the Finance Minister Pranab Mukherjee on the matter, he also plans to meet him.
Centre had asked states to levy lesser CST, however States complain that despite doing so, they are yet to be compensated for it. The Central Government should abide by its commitment made towards the states (for compensating them),” Modi said. He further informed that Prime Minister Manmohan Singh had recently written to the empowered committee proposing to keep natural gas and regasified LNG under a standard rate (bringing the items under declared goods category).
“The committee members are not in favour of this proposal and their first reaction was against it,” Modi said.
There is a uniform rate charged by the Centre for items listed under the declared goods category, however states charge a lot more on undeclared goods items. Once natural and regasified LNG are brought under the declared goods category, States would lose out on revenue and hence they are opposed to it.
The States also discussed the less than satisfactory growth in the VAT and non-VAT revenue collection during the first six months of the current fiscal compared to the same period last year, due to the economic slowdown.
“Though there is an adequate 20% growth in VAT and non-VAT revenue collection during the first six months of the current fiscal, compared to same period last year, there is a fall, especially due to inadequate motor vehicle sale, poor growth in construction sector and high petrol prices,” Modi said.
