BJP ready to give Centre space on VAT

Although it is now almost certain that Bharatiya Janata Party-ruled states will continue their non-cooperation with the central government on the issue of the value-added tax, top BJP leaders said their party's position was not immutable and that it could change if the central government were to set up some mechanism to redistribute resources between the Centre and the state.

The economics of rejecting the VAT, when they were supporting it until a few months ago, has not been spelt out by the BJP-ruled states.

Rajasthan Chief Minister Vasundhara Raje had said in Jaipur that until the central government made it clear that how it was going to compensate the states for the loss, the state would incur on account of the imposition of the VAT, the states could not put in place a measure that would hurt consumers, traders and businessmen alike.

This was echoed by Madhya Pradesh Chief Minister Babulal Gaur.

But with the kind of mobilisation that is on in Madhya Pradesh and Rajasthan currently, it is clear that traders are being rallied on the basis of political rather than economic logic.

Meanwhile, even as chief ministers of the BJP-ruled states decided not to implement the value-added tax from April 1, the BJD-BJP government in Orissa said it would be going ahead with the new tax regime as planned.

"We are not a party to this decision and I do not think they had invited us to the meeting, where this decision was taken," Orissa Finance Minister Prafulla Chandra Ghadai said.

"We are going ahead with the decision to implement the VAT from April 1," he said while reacting to reports that BJP- ruled states would not implement the VAT till it was uniformly done across the country. "As far as I know no one has talked to our chief minister (Naveen Patnaik) about this," he said.

The BJD and the BJP run a coalition government in Orissa with Ghadai belonging to the regional outfit. Ghadai said that chief ministers of all states had agreed to change over to the VAT system at the meeting of the empowered committee.

It was decided at the meeting that the central sales tax would continue for 2005-06 and would be reduced to two per cent during 2006-07. It would be phased out altogether from 2007-08, he said.