CSD canteens may come under VAT!

The empowered committee of state finance ministers has favoured bringing CSD of the armed forces under the purview of value-added tax (VAT) and said the subsidy component on such canteens, if any, should be borne out of the annual budget of the defence ministry.

States have mandated Chairman of the committee Asim Dasgupta, to take up the matter with Defence Minister Pranab Mukherjee if required.

"Most of the states have agreed that CSD canteens should continue to be covered under the VAT. The general view in the meeting was that subsidy should be given to CSD, but the subsidy component should be borne out of the defence ministry's budget and not at the cost of state revenues," an official said.

Items sold in CSD canteens now attract a 12.5 per cent VAT. Punjab and Haryana are, however, of the view that CSD canteens should be kept out of the VAT purview as including them under the new regime will adversely impact ex-servicemen who enjoy the benefits of subsidised products.

The state finance ministers also decided that the next meeting of the committee on April 25-26 would take a final view on issues such as differences in the rate list. Most variations have been noted in case of states like West Bengal, Assam and Delhi.

A consensus at the meeting will be binding on all states to implement the committee's recommendations on rates.

Officials said there was also a view that if states were found to be deviating even after that, then the committee would recommend to the government that the central grant of such states be stopped.

Officials said the next meeting of the state sales tax commissioners on April 21 would consider a proposal made by several states to expand the definition of foodgrains to include items like atta, maida and suji.

Some states have exempted these items from VAT on the ground that these are common-use food items while others have put these under 4 per cent VAT on the ground that these are processed food items.

It may be recalled that the empowered committee has allowed states the freedom to either exempt foodgrains from VAT or put them under 4 per cent VAT for the current fiscal.

The next meeting will also firm up a view on exempting branded salt from VAT. Some states have imposed a 4 per cent VAT on branded salt.

While Uttar Pradesh continues to maintain that it will implement VAT only after its traders accept the new regime, Chandigarh has implemented VAT.

However, there is still no clarity on when Pondicherry will implement VAT. Officials confirmed it had not yet mentioned any specific date.