Delhi may not switch to VAT

Delhi is unlikely to introduce the value-added tax from April 1 this year. The state government said it was reconsidering its decision to shift to the VAT regime due to the opposition from industry representatives.

"An overwhelming majority of traders and industry representatives have voiced their opposition to the new tax regime. We will have to keep their views in mind before taking a decision on VAT," State Finance Minister Mahinder Singh Saathi said.

He said a decision would be taken in a week. Earlier, speaking at an interactive session on VAT, he said the new tax regime would generate higher revenues but would increase the tax burden on traders and the business community.

"Of course, it is not a friendly tax for exporters and traders. How can I justify jumping from a 4 per cent sales tax regime to a 12.5 per cent VAT? The step will definitely increase revenues, but it is the people who have to carry the entire burden," Saathi said, at a seminar organised by the Federation of Indian Export Organisations on VAT.

He expressed concern over the apprehension of traders on VAT being implemented from April 2003. However, he pointed out "This system has been adopted overwhelmingly world-wide."

Meanwhile, speaking at another seminar in New Delhi on Tuesday, Delhi Chief Minister

Sheila Dikshit said, "There are reservations against the introduction of VAT in its existing format, which we will forward to the Centre for the necessary changes in the draft VAT legislation."

The Delhi government has convened a meeting tomorrow. A host of trade, commerce and industry bodies would share their views on the issue, Dikshit said.

"We are not against the VAT regime, but we are not going to rush over it," Dikshit said, at the sidelines of a session on "Economic Agenda for Delhi's Growth", organised by the Confederation of Indian Industry.

The bottomline would be to seek changes to the existing provisions for the National Capital Territory, which has a large number of manufacturing units, Dikshit said. When asked what went wrong with the earlier decision to adopt VAT, she said, "a lot of politics got into it."