"The state will incur revenue loss of Rs 1,500 to 2,000 crore, which will be compensated by the central government," B C Khatua, state sales tax commissioner said on Friday.

However, the centre would not compensate the loss arising out of tax rate modifications carried out by state beyond the stipulations of empowered committee on VAT, Khatua said on the sidelines of a seminar on VAT organised by Bombay Chamber of Commerce and Industry in Mumbai.

The crisis over VAT: Complete coverage

"Through a communique to state governments, the empowered committee has clarified that the Centre will not compensate the revenue loss arising due to tax rate modifications beyond the limit of the committee," he said.

Khatua said the state would have to bear a certain amount of revenue loss, which would not be compensated by the centre as it has gone further with tax rate modification for certain commodities.

He said the sales tax commissionerate is planning to align classification of the excise tariff and necessary clarifications would be issued through circulars and notifications soon.

"Confusion on procedural issues on VAT is still there in industry circles and government department. We will be addressing those issues by updating website on VAT and posting new circulars and notifications," Khatua added.

State to spruce up sales tax department

In its bid to facilitate easy implementation of VAT in the state, the Maharashtra government is planning to restructure its sales tax department.

"The sales tax department is undergoing a transformation and a new system is slowly evolving to address the bottlenecks on implementation of VAT," sales tax commissioner B C Khatua said.

The overhaul is expected to be completed in three to four months, with management consultant firm Price Waterhouse Coopers Pvt Ltd assisting the state to induct international best practices in implementing VAT.