The state government is likely to convene a meeting with traders association in August to rationalise the value added tax (VAT), a demand for which has ever been rising since Samajwadi Party stormed to power in March this year.

UP chief minister Akhilesh Yadav has already assured that VAT on different commodities will be reduced to bring it at par with the neighbouring states like Delhi and Haryana.

The state levies tax in four slabs zero percent, one percent, four percent and 12.5 percent on nearly 5,000 items. The demand for rationalisation of VAT was made by president of Akhile Bhartiya Udyog Vyapar Mandal (ABUVM) Sandeep Bansal. The anomoly has not only resulted in exploitation of traders but also consumers,'' Bansal said.

SP supremo Mulayam Singh Yadav had refused to apply VAT during his regime. In 2007, it was finally introduced by BSP chief Mayawati. Mulayam too had raised the issue of abolition of VAT during his election speech at Baghpat on 27 February.

This was one of the pricipal demand of the traders who also asked the state government not to allow foreign direct investment (FDI) in the retail sector. It harms the interest of the farmers and small businessman. It will not be accepted, this is my assurance, Akhilesh said.

The two important assurance by the state government are seen crucial in the wake of Lok Sabha elections. The Samajwadi Party has already raising a pitch of support from traders for the parliamentary elections due in 2014.