The Tamil Nadu government has taken a U turn in its decision to implement VAT in the state. The TN government has said that it would implement VAT only if the Centre agreed to compensate the state Rs 2,400 crore, the expected loss due to the implementation of VAT.

The decision, however, has not enthused the pharmaceutical industry and the trade in the state. According to trade sources, the decision of the Tamil Nadu government is in line with the other states and may change in the immediate future. “The government said it would move to VAT on April 1, 2003. Suddenly it has taken a decision to move away from it even though it had said that it was ready to bear the loss in revenue. The government in the coming days can agree to it which means it would move to VAT,” said a trade source.

Industry sources, surprised at the move, however said they were apprehensive of the move. “It is not been made very clear. It has asked the Centre to compensate for the loss when during the budget it said it was ready to take the loss. The matter is now in a haze,” said an industry source.

The Tamil Nadu government however has not specified the deadline for which it requires an answer from the Centre. The Tamil Nadu government, it can be recalled, while presenting the budget had declared that it would move to VAT despite the loss in revenue. The sudden decision of the government not to accept the loss is against the decision to accept the loss in revenue. Top government officials were tightlipped about the sudden U turn.