The panel on value added tax has decided that items which have at least 50 per cent industrial use will attract 4 per cent tax rate for that particular use.
Such items will be treated as industrial raw material and four per cent VAT on them for that particular use will not be taken as deviation, empowered committee secretary Ramesh Chandra said.
Had it been taken as deviation, states would not have been entitled for compensation in case they lose revenue due to VAT for these items, Chandra explained.
It will be entirely states' prerogative to certify items falling under this category, he said.
All inputs attract 4 per cent VAT rate, while final products draw 12.5 per cent rate.
The committee, at its recent meeting with chambers and trade bodies, also clarified that job work will not attract any VAT since it is not a part of sale.
Job work, like if some one asks a printer to print something and pay for that work without involving further sale, would be taken as labour services only, Chandra said.
While traders are complaining that job works are attracting VAT rate to the extent of 12.5 per cent, tax commissioners are denying it, he said.
At present, job works are drawing 12.5 per cent VAT rate, said Praveen Khandelwal, Confederation of All India Traders' secretary general and member of consultative committee of VAT panel with trade and industry.