Jharkhand to adopt VAT in Jan

More states, including the Bharatiya Janata Party-ruled Jharkhand, are slated to implement Value Added Tax from January 2006, a move that will significantly improve their revenue collections and financial health.

"We are hopeful that other states will join from 2006," Asim Dasgupta, chairman of the Empowered Committee of State Finance Ministers on VAT, said after a meeting in New Delhi on Wednesday.

Viewing the significant rise in revenue collection in states that switched to VAT, Uttaranchal has decided to implement VAT from October and Jharkhand is preparing to do so from January 2006. "We have drafted a VAT Bill which will be introduced in the state assembly if it meets in December. Otherwise an ordinance will be issued for implementing VAT from January," Jharkhand Finance Minister Raghubar Das said.

Also Read States need more tax powers Breaking the VAT chain

He said the state has taken this decision after consulting the central leadership of BJP. The state did not implement VAT from April as there was no formula for compensation after the phase out of central sales tax, he added.

Das also indicated that other BJP-ruled states may also switch over to VAT but the timing is yet to be decided by the respective state governments. "We will meet the chief ministers of BJP-ruled states next month. Only then will we be able to know their decision about implementing VAT," Dasgupta said.

Dasgupta, who is also West Bengal finance minister, said he would be visiting Uttar Pradesh and Tamil Nadu to persuade the state governments to switch over to VAT.

Uttar Pradesh, where the resistance of traders to VAT has been declining after the success of the new tax in 21 states, has also invited the VAT panel for discussion after Diwali. "We were never against VAT in principle. If traders agree, we will implement VAT," UP Agriculture Minister Ashok Bajpai said.

Although 21 states and Union Territories switched over from sales tax to VAT from April, the five BJP-ruled states -- along with Uttar Pradesh and Tamil Nadu -- continued with the old sales tax regime.

The VAT panel has again appealed to the remaining six states to take a conscious decision to adopt VAT and augment their revenues.