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VAT panel concerned over Govt action on declared goods
June, 17th 2006

News

17th June, 2006

VAT panel concerned over Govt action on declared goods

`Consultation with State Finance Ministers panel is necessary'

The States are feeling the heat of the Centre's unilateral action on the `declared goods' front.

They have "strongly suggested" that consultation with the Empowered Committee of State Finance Ministers on VAT is "absolutely necessary" before the Centre takes any view on the matter of placing any goods in the list under the Central sales tax law.

Close on the heels of bringing LPG in the list, the Fertiliser Ministry has mooted a proposal to bring naphtha, natural gas, furnace oil and LSHS diesel - used as inputs in fertiliser manufacture - in the list.

Currently, naphtha attracts VAT rate of 12.5 per cent in most States.

Once the Centre places an item in the list, the States cannot levy a VAT/sales tax of more than four per cent for sales within the State.

VAT on inputs

While the Fertiliser Ministry appears to be pitching for uniform VAT rates across the country for inputs used in fertilisers, it is also keen that the VAT rate on inputs used in fertilisers does not exceed four per cent.

The sales tax element on inputs such as naphtha and natural gas are crucial as these are also items of costing for deciding the Centre's fertiliser subsidy.

The issue of placing inputs used in fertiliser in the list was taken up for some discussion by the VAT Panel at its meeting on Thursday, after the Centre had referred this issue to it.

A final view of the VAT panel on this matter is yet to emerge, official sources said.

The VAT Panel Chairman, Dr Asim Dasgupta, said that the Central Government had, without consulting the States, included LPG in the list in Budget 2006.

"This has resulted in lot of suffering and significant loss of revenues for the States. We want to express our strong displeasure on this move of the Centre."

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