Most states to miss VAT date

Even though there is just a day left before the expiry of the deadline for state governments to switch over to the value-added tax regime, there is still considerable uncertainty.

For now, Finance Minister Jaswant Singh's promise of a nationwide VAT regime from April 1 seems to be a pipedream.

Every state is trying to gauge whether others will change over to the new tax regime before taking a decision.

At last count, Madhya Pradesh, Gujarat, Maharashtra and Andhra Pradesh seem to be the only states which might stick to the VAT deadline, say government officials.

However, even these four states are huddled in deliberations on whether to shift to VAT or wait for a new deadline.

Delhi, Himachal Pradesh, Kerala and a few northeastern states have clearly said they will not change over to VAT from April 1.

Tamil Nadu and Kerala have encountered problems on the legislative front.

The delay by Tamil Nadu in sending its Bill for Presidential approval has stretched the whole process.

The state Cabinet will have to meet again to approve the incorporation of some changes proposed by the Centre.

As the legislative formalities might not be completed in time for the April 1 deadline, the state has backed out.

Kerala too has a similar problem. Moreover, stiff resistance from traders has forced the state to shelve the VAT plan for now.

The state has, however, officially said it will not shift to VAT since its neighbours are not changing over.

However, Madhya Pradesh is in favour of VAT. Chief Minister Digvijay Singh has decided to make the changeover an election issue.

According to analysts, the possibility of having a VAT regime in just a few states is feasible. Several countries like Canada, Brazil and the US have partial VAT regimes.

Several Indian states like Andhra Pradesh, Kerala, Madhya Pradesh and Maharashtra have tried their hand at implementing VAT.

However, except Maharashtra, no state has attempted implementation of VAT in the proper form as is being planned now.

Maharashtra implemented VAT from October 1995 on certain items and provided set-off on input tax to manufacturers for tax paid above 4 per cent.

The state withdrew VAT and replaced it by first-point sales tax from April 1, 1999, largely due to non-economic considerations, analysts said.