The most crucial of these is the decision to end the inter-state tax war with states agreeing to implement uniform floor sales tax rates and phase out Sales Tax-based incentives by January 1, 2000. Minister of State for Finance V Dhananjay Kumar said that the decision was a ``gift for the new millennium.''

From January 1, 2000, there will be two special floor rates of sales tax apart from a four-tiered slab of zero, four, eight and twelve per cent, for specified commodities, below which the states will not be entitled to go. The two special rates will be one per cent and 20 per cent for specified commodities.

At present, to compete with one another, states levy sales tax according to their decisions on different commodities which they now won't be able to. As aresult, prices of commodities will be more or less uniform in different states.

Another significant decision was to put an end to Sales Tax- based incentive schemes from January 1, 2000. This will put an end to tax concessions for areas defined as backward in different states and regions. This also means that from the proposed date, no state will give any kind of tax concessions to any industry for starting a project.

However, this decision will only be applicable to those industries which apply for projects from January 1, 2000. Industries already enjoying certain concessions under the present rules will continue to enjoy them.

The states also agreed to introduce Value Added Tax (VAT) with effect from April 1, 2001. This will help industries as they will get rid of paying taxes during various stages of the production process and instead pay taxes only on finished products. Since some state CMs expressed apprehension that with introduction of VAT, they would incur revenue losses, the Finance Ministerassured them that if any such loss occurred, the Central Government would compensate.

For rationalisation of central sales tax (CST), the proceeds of which are shared between the Centre and the states, the National Institute of Public Finance and Policy (NIPFP) will first study the issue and then only will any decision be taken subsequently by the CMs at a prospective conference.

The Finance Minister will also constitute a Standing Committee of all state Finance Ministers to monitor and implement the decisions arrived at. Another such conference will be organised during the middle of January 2000 to review the implementation of these decisions.