Yes to VAT, but no to Central sales tax

FOR change, the ministers who hold the purse strings of the seven sisters met recently and shared their concern on talking up the economy.  One hurdle, to quote K Therie, is “Rampant extortion and illegal collection of taxes by different groups”. These are posing a real threat to the overall economy, Nagaland Finance Minister says. His view, shared by his counterparts is all the traders must be brought under the tax net as there was a general tendency among them not to pass on the sales tax collected from the consumers to the treasury. They found in VAT a real effective means to plug tax evasion and resolved to implement VAT on the same day through out the region.  Centre has bee requested to help set up VAT infrastructure besides providing training and technical consultancy. The states on their part will strive to prepare proposal for computerisation of their taxation network by October 15. As a step towards uniformity, all the NE States will strive to have similar sales tax structure; adopt uniform floor rates on all 227items listed by the Empowered Committee of States Finance Ministers. This move is aimed avoiding tax disparities and to make NE a common market by year end. There were a couple of caveats for restoring fiscal health. First, the conference said, the centre must abolish the Central Sales Tax. Second, the railways should allow examination of goods before departure or delivery to see that local sales tax is not evaded.

Expectedly, the Finance Minister conferences resolved to create a mechanism to exchange information as regards cross verification of inter-State transactions and statutory forms to check evasion. A diktat went out to the tax officials manning inter-state check gates to share information and work as comrades. The finance ministers adopt a common stand before the 12th Finance Commission headed by economist Rangarajan. The basic idea is to make Delhi realise hardships poor states face if the centres goes about unilaterally on matters like pay hikes. Another area of interest is asset maintenance, upgradation of administration, 100 per cent reimbursement of security related expenditure and revival of  pre-1989-90 commitment of the centre to meet the Non-Plan deficit through a special annual grant. At present Centre meets 75 % of the bill on centrally sponsored schemes. The balance is put in by the states. Finance ministers wanted the funding pattern be changed to 90:10. Extending the same logic, they demanded 100 per cent grant from the Non-Lapsable Central Pool of Resources. Right now, the money comes as 90 per cent grant and 10 per cent loan.

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