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Sinha convenes chief ministers' meet on Jun 22

Finance Minister Yashwant Sinha has convened a conference of chief ministers and state finance ministers here on Thursday to evolve a time-frame for converting the country into a common market through tax reforms in domestic trade including introduction of value-added tax, or VAT.

The meeting will also review the implementation of uniform floor rates of sales tax by states from January this year and work out a methodology for introduction of VAT from April 1 next year.

An official statement said that the meeting will discuss among other things classification of listed commodities, variations in phasing out sales tax related incentives, treatment to be accorded to special category states and reforms in central sales, consignment, profession and service taxes.

The government has set up an expert committee this month for widening service tax that has the potential to increase indirect tax collections by 40 per cent.

Introduction of VAT would convert the country into a uniform common market of states and the chief ministers' conference is expected to fix a time schedule for accomplishing specified milestones for adopting a common VAT system in the entire country.

More than 110 countries in the world have adopted the VAT system and neighbouring countries like Bangladesh, Bhutan and Nepal were in an advanced stage of preparation for switchover to VAT.

Total compliance towards implementation of uniform floor rates of sales tax has been reported by Maharashtra, Andhra Pradesh, Nagaland, Sikkim, Manipur, Daman and Diu and Dadra and Nagar Haveli and near-total compliance by all the remaining states and Union Territories except Bihar, Pondicherry, Arunachal Pradesh and Mizoram.

While Arunachal Pradesh and Mizoram do not have a sales tax system, Andaman and Nicobar islands and Lakshadweep have not been brought within the ambit of this decision.

The conference is to take a view on the recommendation of the standing committee of the state finance ministers in regard to 25 per cent cut in the Centre's financial assistance to Pondicherry and Bihar and also likely to endorse the suggestion that Arunachal Pradesh and Mizoram should enact suitable legislation to introduce sales tax and subsequently move towards a uniform floor rate.

Meanwhile, some special category states like Mizoram, Meghalaya, Nagaland, Arunachal Pradesh, Manipur, Tripura, Assam, Sikkim, Jammu and Kashmir and Himachal Pradesh have demanded continuation of sales tax based incentives and this is likely to be looked into in the conference.

In the last conference of chief ministers in November last year, it was decided that VAT will be implemented by all the states and Union Territories from April 1 next year and the interim period would be used for preparation, training, computerisation and publicity in this context, the national institute of public finance and policy was asked to provide technical assistance.

PTI

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