Concessional tax rate abolition may bring in more VAT revenue
August, 22nd 2006
The Central Ministries and organisations such as the Railways are likely to bring in at least Rs 2,000 crore of additional value added tax revenues annually to the States if the current proposal to do away with the concessional tax rate enjoyed by Government departments on their inter-State purchases is accepted by the VAT Panel.
The compensation package for the proposed central sales tax (CST) phase-out includes a proposal to abolish `Form D' that allows Government departments to make inter-state purchases at four per cent rate.
Once Form D is abolished, the central ministries and Government departments would have to shell out the specified normal rate under VAT schedules.
The VAT panel is to meet here on August 24 to discuss the compensation package for CST phase-out. Annual CST collections during 2005-06 stood at Rs 18,000 crore. Currently, the entire CST is collected and retained by the States.
Meanwhile, sources in the Government said that the tax revenues of VAT implementing States have grown by about 24 per cent in July 2006 on a year-on-year basis. In the first four months of the current fiscal, the tax revenues of VAT implementing States grew by 26 per cent.