Sixth Pay Commission: 'High VAT, other tax mop-up to cushion impact of pay revision'

NEW DELHI : Buoyancy in VAT and other tax collections will cushion the impact on finances of states, following a hike in

salaries of government employees as recommended by the Sixth Pay Commission, credit rating agency Fitch said on Thursday.

The agency said that fiscal condition of states has improved massively since 1997 when the states implemented the previous

pay revision.

That time states were grappling with grim fiscal situation with only 9 out of 26 states having a revenue surplus. Now 21

states had revenue surplus in financial year 2007-08.

Though recommendations of the Sixth Pay Commission are only for central government employees, it is a common practice for

states to adopt them while revising salaries of their employees.

Five states, including Uttarakhand and Uttar Pradesh, have already announced that they will follow recommendations of the

Commission.

Thus the Sixth Pay Commission reward will be well absorbed by the states, despite an expected slowdown in the economy, Fitch

said.

As far as the Centre is concerned, the commission's report, to be implemented from September will hit the exchequer by over

Rs 20,000 crore this fiscal, Fitch said.


Source: http://economictimes.indiatimes.com