State govts may levy 4-5% VAT on sugar,textiles from Apr'12

State governments are set to levy 4-5% value added tax (VAT) on sugar and textiles from April 1, 2012.

This move will increase cost pressures on sugar and textile but Sushil Modi, Deputy CM, Bihar and chairman of Empowered Panel of State FMs said the move would not be inflationary.

Modi said that additional excise duty on these items was collected earlier by central government, with this states were getting 1% extra debilition. But the 13th Finance Commission recommended that states will not get 1% extra debilition.

Modi also said that this is not a new decision because with withdrawal of central excise duty by the central government, at that time it was decided that the states shall impose VAT on these items.

"There is a consensus among states to implement VAT on these items from April 1, 2012," he added.

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