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States concerned over proposed VAT hike
Jan '08
Committee of State finance ministers recently met with the Union Finance Minister P Chidambaram to discuss the implications of terms under the phased reduction of central sales tax (CST).

Government approved the phased reduction of CST in 2006. By April 2008 the CST will be cut down from 3 to 2 percent.

The total collection from CST comes to about Rs25,000 crore. Experts believe, with this cutback states will lose about Rs12,000-13,000 crore in revenue.

Now, to cope the loss, Centre has proposed a one percent hike in the value added tax (VAT) on several products including LPG, ready-made garments and intermediate goods.

The Centre has asked States to raise the VAT from 4 to 5 percent, effective from April this year.

However, the states are not completely in favour of this hike. Insiders informed that States were presenting their doubts and concerns as well as holding talks with the Centre, so as to reach a mutual stand.

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Courtesy: House of Fraser

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