Existing sales tax incentives given to industrial units in Maharashtra and Gujarat may continue even after the introduction of value-added tax in the country.
In addition, Haryana and other northern states may be allowed to charge a temporary parking rate of 10 per cent till Delhi switches to VAT.
Tuesday's meeting of the empowered committee of state finance ministers was unable to iron out differences among states on these issues. While sources said they would be discussed again on April 23, it was acknowledged that the differences were difficult to bridge.
Going against the consensus, Maharashtra and Gujarat, the two most industrialised states in the country, have said industrial exemptions in their present form should continue. All states had earlier agreed to deferring the sales tax obligation of industries that were given exemptions.
Maharashtra and Gujarat said since it was difficult to monitor units, it was better to continue with the sales tax exemptions for the remaining years of their period of validity.
Under the deferral mode, the units will defer their liability, to be made good to the state governments later.
Various state governments have, over the past few decades, provided a plethora of tax-based incentive schemes to encourage private sector investment in backward areas.
The incentives used to vary depending upon factors like the nature and amount of investment and products manufactured.
Haryana, the only state to have shifted to VAT so far, has imposed a new 10 per cent tax, apart from the scheduled VAT rates of 4 per cent, 12.5 per cent and 20 per cent.
Haryana has chosen to tax items at 10 per cent to compete with neighbouring states like Delhi and Punjab, which are yet to shift to VAT and are taxing commodities at a lower sales tax rate of 8 per cent.
There are several anomalies in the VAT legislation of different states, including non-uniformity in commodity classification and definitions, different taxable turnover limits across states and anomalies in the list of exempted items.
These residual issues will also be taken up in the next meeting of the committee.
