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VAT sops after GST: State may make budget provisions

September 1, 2016

AHMEDABAD : With Value Added Tax (VAT) set to be subsumed into Goods and Services Tax (GST), Gujarat government is mulling over making budgetary provisions to honour incentives extended in the form of VAT refunds after GST is implemented.

Many government departments such as industries and mines, agriculture and co-operatives as well as science and technology have so far come out with VAT reimbursement schemes. “Once GST comes into force, there will be issues with regard to these schemes.At the same time, the government cannot go back on legal commitments made to various companies,” said a top government official. “A monetary provision will be made in the annual budgets to provide compensation in lieu of VAT refunds to various companies,” the official added. There will be no levy of VAT after GST.

According to sources, the incentives are likely to be paid from an amount provisioned in the state budget as against the current practice of reimbursement through the commercial tax department.

In order to attract big-ticket investments, especially auto projects, Gujarat government offered VAT refund incentives to various companies. For example, major auto companies such as Tata Motors, Ford India, Suzuki Motor Corporation (SMC) and Honda Motorcycle and Scooter India (MHSI) among others have been granted fiscal incentives including refunds of VAT not exceeding the investments made by these companies.