In fact, he welcomed the decision to put an end to sales tax-based incentive schemes in all the States and Union Territories as it would drastically reduce tax evasion.

The decision would greatly help Gujarat for the State was incurring huge sales tax revenue due to tax evasion through billing from the Union Territories of Diu, Daman and Dadranagar Haveli, the minister said. Gujarat expects to net sales tax revenue of Rs 5,400 crore for the financial year 1999-2000 as against Rs 4,800 crore in 1998. The decisions on tax reforms would certainly help Gujarat attract entrepreneurs to set up their units in the State in view of better infrastructure facilities and industrial peace available in the State, he said.

At Tuesday's conference of Chief Ministers and Finance Ministers in Delhi, all the States and Union Territories had agreed to end the inter-State tax war by implementing uniform floor sales-tax rates and phase out ST-based incentives by January 1, 2000. The States also agreed to introduce VAT with effect from April 1, 2000. In his speech delivered at the Delhi conference, Gujarat Finance Minister Vajubhai Vala had said the estimated loss of Rs 1,070 crore due to the proposed implementation of VAT in the State would be mainly because of provisioning for set-off of input taxes, rationalisation in the rates, cost of restructuring the sales tax administration and its computerisation.

"In view of the difficult financial position, we are not in a position to bear transitional losses for implementation of VAT," Vala told the conference, urging the Centre to suitably compensate the losses. A system based on VAT in sales tax could not be successful unless preparatory steps were effectively implemented before its introduction, he felt.

The minister also stressed the need for suitably amending the Central Sales Tax Act keeping in view the requirement of VAT, adding, "It will be ideal if all the States draw up a common blueprint for preparatory work and effective implementation of VAT, which will ensure uniformity in our approach".

Vala told the conference that though Gujarat endorsed the agenda for implementation of sales tax floor rates by all the States, he would suggest that this concept be extended to Central sales tax regime also. And in this context, powers of the State Governments to dispense with the requirement of C Form under the Central Sales Tax Act should be withdrawn.

On his return from Delhi, the minister briefed the State Cabinet meeting here on Wednesday about the decisions on tax reforms taken at the Delhi conference. After the Cabinet meeting, Vala told newspersons that the Centre had assured all the States, including Gujarat, that they would be adequately compensate the losses incurred due to the implementation of VAT.

He said the Centre's positive response to Gujarat's request to allow it to levy consignment tax on certain products manufactured in the State but being sold in other States would also help the State to partially offset the losses due to the VAT regime.