VAT panel firm on April 1 deadline

The empowered committee of state finance ministers is firm on sticking to the April 1 deadline for switching over to Value Added Tax despite the "friction" coming in the way from traders and a handful of states.

After missing the deadline for more than four times in the last 6 years, VAT committee is determined to opt for the tax reform as most of them see about 20 per cent jump in revenues.

"There is bound to be some friction whenever there is a movement (to a new regime). But we will stick to the April deadline. There will be no deviation this time," the VAT committee's secretary Ramesh Chandra said.

He said traders have been expressing reservations on various issues and accordingly some states have sought relaxations from the earlier proposals on VAT rates and threshold limit for traders.

The crisis over VAT: Complete coverage

"We have addressed those issues and relaxed a number of things," Chandra said, adding that there was no reason for not going ahead with VAT now.

VAT committee has already relaxed a number of things and given states the option to revise upward the threshold limit to Rs 10 lakh for a trader to come under the new tax regime.

Earlier, the limit for a trader to come under VAT purview was Rs 5-40 lakh. The upper limit was raised to Rs 50 lakh after a request from Uttar Pradesh.

So, states can either peg the limit at Rs 5-50 lakh or Rs 10-50 lakh. If any state opts for the latter, it stands to lose.

The Rs 5-50 lakh limit would be based on taxable turnover and not gross turnover. Traders within this limit can pay a composite VAT of one per cent but will not be entitled for input tax credit.