Offering major relief to traders and industry, the Empowered Committee of State Finance Ministers on Wednesday pegged down value-added tax rate on medicines and certain local items from 12.5 to 4.0 per cent when the new tax regime will be introduced from June.
The VAT panel would again meet on April 29-30 to draw up the list of certain life-savings drugs, which may get further concessions.
"To provide relief to small traders, it has been decided that dealers with a turnover of Rs 500,000 would be exempted.
For dealers with turnover of Rs 5-40 lakh, it was decided to have a Simple Composition Scheme with only 1.0 per cent tax on gross turnover," the VAT Panel's chairman Asim Dasgupta told reporters after its meeting in New Delhi.
The panel's decision to increase the upper limit of turnover from Rs 25 lakh to Rs 40 lakh (Rs 2.5 to 4 million), for a dealer to come under the tax system is consequent to a nationwide strike against VAT from March 31 to April 1.
With the new scheme, Dasgupta said, "majority of small traders will not be coming under the VAT net."
Industrial incentive schemes committed by the states in the form of deferment, remission and exemption of tax, would also continue without disturbing the VAT chain system, he said.
"The VAT chain can not be disturbed. At the same time, incentives to industrial units will continue," Dasgupta said.
