States to levy VAT on sugar and textiles from Apr 2012: Modi
New Delhi, Oct 14 (PTI) Sugar and textiles are likely to become costlier as state governments today decided to levy value added tax (VAT) at 4-5 per cent on these two essential items from April 1, 2012. A decision in this regard was arrived at the meeting of the Empowered Committee of State Finance Ministers, said the panel chief and Bihar Deputy Chief Minister Sushil Kumar Modi. "There is a general consensus that from April 1, 2012, states will impose VAT on sugar and textiles because they are incurring losses," Modi told reporters here. He, however, said some states have reservations on imposing the levy. Though he did not name the states. Till 2005-06, the Union government was collecting additional central excise duty on tobacco, sugar and textile and the states were getting one per cent more in their share from the central divisible pool of the total tax proceeds. However, the central levy was abolished as recommended by the 13th Finance Commission and hence, the states too suffered losses on revenue. While states started imposing VAT on tobacco from 2006-07 onwards, they could not do so for sugar and textiles as these two were in Centre's tax schedule. However, following the 2011-12 Budget, sugar and textiles have been removed from the centre's list and states can now levy VAT. Some states have a floor rate of 5 per cent for VAT, others charge it at 4 per cent.