Business & Economy 

All states accept VAT, promise to implement it from April 2005

What is India News Service, 19 June 2004, 1920 hrs


Finance ministers of all states have consented to implement Value Added Tax (VAT) from April 1, 2005. India Inc wants tax exemptions for incomes of up to Rs 1.5 lakh a year. On Dalal Street meanwhile, dividend stocks are finding favour in the absence of clear signals on the new government's directions.

Finance minister P Chidambaram and state finance ministers have reached a consensus to implement VAT nationwide from April next. The move could lead to higher revenues and better business efficiency, and make goods and services cheaper. The finance minister told the states they are likely to gain in revenue. If they encounter a loss, he said the Centre would compensate them.

FICCI and Assocham have urged the finance minister to raise the basic tax exemption limit from Rs 1 lakh to Rs 1.5 lakh. While the government is considering introducing a cess on high income earners, the industry bodies say the 10 per cent surcharge on individuals earning Rs 8.5 lakh should be abolished.

With no clear signals from the new government, investment decisions have become a challenge. Experts are advising investing in dividend stocks as a safe option because most of are available at a huge discount. Bank scrips qualify as dividend stocks. With the government owning 51 per cent equity in most banks, investors can expect good returns in the near future.

Overall:

VAT was okayed: All states said they would implement value added tax from April 2005.

Trade bodies wanted tax exemption ceiling raised: They said it made better sense to raise the exemption limit from Rs 1 lakh to Rs 1.5 lakh.

Dividend stocks were recommended: They look safe in times when the trade  winds are uncertain.