UP cabinet okays implementation of value-added tax
October, 20th 2007
The decks have been cleared for the implementation of the value-added tax (VAT) in Uttar Pradesh. The state cabinet today granted in-principle approval to implement the new tax regime, replacing the trade tax.
The state cabinet, which met here today, also authorised Chief Minister Mayawati to decide the timeframe for implementing VAT in the state.
Soon after taking over the reins of the state on May 13, the Mayawati-led Bahujan Samaj Party government had announced to introduce VAT.
We are in the process of working out the modalities for VAT implementation. It may just be a matter of time, state cabinet secretary Shashank Shekhar Singh said.
He said due to absence of VAT, traders and manufacturers in UP were being denied the input tax credit. As a result, he added, the goods produced in UP were becoming uncompetitive in other states.
The delay in VAT implementation in the state was also affecting investment prospects, the cabinet secretary said.
VAT is a far more practical system and when the entire country is following that pattern, there is no reason why anyone should oppose it, Singh said.
Shekhar Agarwal, state principal finance secretary, said: The implementation of VAT could make substantial difference to the overall revenue accruing from the existing trade tax. The VAT system is more transparent and leaves very little scope for evasion as compared to trade tax. Therefore, its implementation is bound to increase the states revenue.
Uttar Pradesh collects around Rs 170,000 crore in trade tax every year, which is nearly 60 per cent of the states tax revenue receipts.
The state has so far not joined the VAT system due to opposition from the traders lobby, who were patronised by the previous ruling party, the Samajwadi Party.
The empowered committee of finance ministers on VAT, headed by Union Finance Minister P Chidambaram and West Bengal Finance Minister Asim Das Gupta, visited UP in November 2005, to persuade the then UP chief minister Mulayam Singh Yadav to implement VAT. However, Mulayam Singh refused to implement VAT.