Agencies
New Delhi, Apr 8:
An official panel on Tuesday ruled out any increase in VAT rates as part of a package to compensate states on account of revenue loss due to a one per cent cut in Central Sales Tax that was to have happened in the beginning of this fiscal. "Yes, there would not be any increase in VAT rate now," Empowered Committee of State Finance Ministers on VaT Chairman Asim Dasgupta told reporters in response to a query whether the panel is ruling out a hike in the state tax rate.
There is no need to increase the VAT rate at all, he said, particularly when inflation is on an upswing. The VAT panel members met Finance Minister P Chidambaram to reach an agreement over a package for states on account of losses due to a proposed cut in CST from three to two per cent for this fiscal.
The intended cut, however, did not happen since there was no agreement on compensation. "This was a very positive meeting. We wanted to reach a point of convergence relating to compensation for loss to the states on account of reduction of CST from three to two per cent. We have worked out the details and discussed with Finance Minister," he said.
Sources said the Union Finance Ministry has suggested to states to increase VAT rate from four to five per cent on intermediate goods this fiscal and to six per cent next fiscal to partly compensate for losses due to proposed cut in CST rates. States, however, did not agree to this, particularly when "prices are rising", the sources said.
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