Punjab govt opposes move to hike Vat

The Punjab government has taken a clear stand against the idea of hike in the rate of value added tax (VAT), as suggested by the empowered committee of state finance minister at a meeting held on Monday, and wants compensation in lieu of phasing out of central sales tax (CST) in which states have a share.

SS Brar, financial commissioner and secretary, excise and taxation, Punjab told FE here on Tuesday that "phasing out of CST would mean a loss of Rs 185 crore to Punjab for the year 2007-08, which would further be Rs 325 crore in 2008-09 and so on". When asked about the present growth rate of Vat in Punjab, Brar said that "at present the growth rate of Vat in the state was about 12% but it would be about 15% by end of March, 2008".

State industry minister Manoranjan Kalia when contacted told that the proposal aimed at creating an additional level of compensation for states to offset the 1% cut in CST from the next fiscal would prove to be "counter productive".

He said that Centre wants states to increase Vat rate form 4% to 5%, but that would again create disparity between the states under the Vat regime and the states that have not toed the Vat line.