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VAT In Delhi

Delhi has so far followed a wait-and-watch policy. After a recent meeting of the empowered committee on VAT, Delhi finance minister A K Walia had said that it would be feasible to implement VAT in Delhi only if neighbouring states like UP, Haryana and Rajasthan also followed the regime.

With UP, and now Rajasthan, also expressing reservations about implementing VAT, Delhi will be forced to think again. The uncertainty may now impact the Delhi government's Budget planning, which was expected to be dominated by the implementation procedures of the new taxation system.

Implementing a uniform floor rate on diesel also looks doubtful now. In the Delhi Budget, 2004-05, Walia had announced that the government would hike the duty on diesel from 12% to 20% under VAT, if Rajasthan and Haryana did the same.

This uniform rate was to implemented last year but chief minister Sheila Dikshit had put it off till April 1 this year, citing "drought-like situation in rural villages" as the reason.

A senior official said: "The biggest factor is the policy of neighbouring states. If we increase the duty to 20%, diesel will be more expensive in Delhi than in neighbouring states. It would not be fair on Delhi's villagers and businessmen."

The decision of Rajasthan and four other states is like a shot in the arm for traders in Delhi, who will renew their resistance against the new regime. The Delhi Vyapar Mahasangh congratulated the BJP on the decision. The Confederation of All India Traders (CAIT) has declared that VAT is unacceptable in its present form and it will fight against its implementation in Delhi.