VAT to be implemented from June 1

At least 16 states, accounting for 75 per cent of the country's trade and industry, agreed on Tuesday to implement value-added tax from June 1, even as traders sought Prime Minister Atal Bihari Vajpayee's
intervention to block it.

The decision to implement VAT was taken at the meeting of the Empowered Committee of Finance Ministers, chaired by Asim Das Gupta, finance minister of West Bengal.

States which agreed to implement VAT from June are Maharashtra, Gujarat, West Bengal, Madhya Pradesh, Karnataka, Andhra Pradesh, Tamil Nadu, Kerala, Haryana, Assam, Orissa, Bihar, Jharkhand, Tripura, Goa and Meghalaya. VAT was to come into affect from April 1, 2003 but the implementation was deferred following protests from some states and the trading community.

Union territories of Pondicherry and Daman & Diu also decided to go ahead with the new tax regime from June.

States, which did not agree to introduce VAT from June include Delhi, Uttar Pradesh, Rajasthan, Punjab and Himachal
Pradesh.

Union revenue secretary C S Rao was among those present during the meeting, and later told reporters that the Centre would compensate for the loss of revenue, if any, during the first year of the implementation of VAT.

As part of the package, the Centre has promised to reduce Central Sales Tax from 4.0 to 2.0 per cent after VAT is implemented by the states.

The Centre has already promised to fully compensate revenue loss of the states in the first year and provided Rs 700 crore (Rs 7 billion) for 2003-04 in the Budget.

Coinciding with the meeting, traders held an anti-VAT rally in the capital and later a delegation met Vajpayee to
demand modification of the harsh provisions.