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Monday, Jan 31, 2005

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VAT panel yet to decide on purchase tax on foodgrains

K.R. Srivats

New Delhi , Jan. 30

THE 4 per cent purchase tax on foodgrains currently levied by States such as Punjab and Haryana continues to be a thorny issue for the Empowered Committee of State Finance Ministers on Value Added Tax (VAT).

The VAT panel is yet to firm up its views on the treatment that would be appropriate for the 4 per cent purchase tax on foodgrains in the proposed VAT system that is expected to come into force from April 1 this year.

"We are still taking a view on this issue," Mr Ramesh Chandra, Member Secretary of the Empowered Committee, said in response to a query raised at a workshop on value added tax (VAT) organised by the PHD Chamber of Commerce and Industry (PHDCCI).

India Inc has been stressing that, in a VAT regime, all "other existing taxes" of the States and local bodies should get subsumed in the VAT rates.

The White Paper on state-level VAT, released on January 17 specifies that all other existing taxes such as turnover tax, surcharge, additional surcharge and special additional tax (SAT) would be abolished.

The White Paper said that there would not be any reference to these taxes in the VAT Bills. Further, the Paper has also held that States that have already introduced entry tax and intend to continue with this tax should make it vatable.

"If not made vatable, entry tax will need to be abolished. However, this will not apply to entry tax that may be levied in lieu of octroi," the White Paper said.

On its part, industry is pitching for the abolition of all local taxes, including octroi and entry tax rather than making the entry tax vatable.

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