The Hindu Business Line : Finance Minister assures support to States on VAT

THE Finance Minister, Mr P. Chidambaram, on Friday sought to allay apprehension of States that the proposed value-added tax (VAT) regime would result in loss of revenues for them. He reiterated the Centre's support to the States for making up loss of revenues, if any, from the implementation of VAT.

"States should have no fears that VAT will bring about revenue loss. Haryana introduced it two years ago and the State Government had earned 20 per cent more revenue over the previous year. The Central Government will cooperate with the State Governments to make up for the loss of revenue,'' Mr Chidambaram said while replying to a brief discussion on the Central Excise Tariff (Amendment) Bill 2004.

He also said that the VAT movement had been spearheaded by the West Bengal Finance Minister, Dr Asim Das Gupta, and a broad consensus was being evolved on it and after several rounds of meetings, it was felt that it be brought on April 1 next year.

The Lok Sabha today approved the Central Excise Tariff (Amendment) Bill 2004, which found support from both sides of the House.

Mr Chidambaram held that the changes being made to the Central Excise Tariff Act would facilitate trade and also bring down the number of disputes.

The Central Excise Tariff (Amendment) Bill 2004 seeks to put in place a common harmonised system of nomenclature (HSN)-based eight-digit classification code for central excise in line with the existing eight-digit classification code being adopted for customs and the Exim statistics.

Sources said the main objective of the proposed legislation is to have a common classification code for both customs and central excise in alignment with the code followed by the Directorate General of Foreign Trade (DGFT) and the Directorate General of Commercial Intelligence Services (DGCIS).

Currently, manufacturers and exporters/importers have to follow different codes for central excise duty and for countervailing duty (for imports) and drawback (for exports).

The common classification code is expected to eliminate problems due to divergence in different classifications and facilitate electronic data processing (EDP).

Besides reducing classification disputes, it will also enable collection of more specific data on commodities of special significance and share them with the other Government agencies.

The Bill also proposes to incorporate standard units of measurement. These standard units are taken from the World Customs Organisation-evolved internationally accepted standard units.

Accounting by reference to standard unit will also enable declaration of easily verifiable values.

Currently, no standard units of measurement are prescribed in the central excise tariff.