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Rediff.com  » Business » AP swallows VAT pill, MP refuses

AP swallows VAT pill, MP refuses

By BS Bureau in New Delhi
March 23, 2005 12:02 IST
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Except for a bandh call given by the chemists on March 17, the Andhra Pradesh government's decision to implement value-added tax from April 1, 2005 has faced no resistance from the trading community in the state.

The chemists' argument that VAT would lead to increased drug prices seems to have few buyers as the commercial taxes department has in an extensive publicity campaign, claimed that medicines would attract a lower tax rate of 4 per cent under the VAT regime.

Some traders, however, remain unconvinced. They apprehend that they would be put out of business in the post-VAT scenario, with manufacturers taking control of the logistics of the commodity movement.

Most of the other fears of businessmen though, have been allayed by the state government. In contrast to the VAT enacted in 2003, the new Act seems more palatable.

TheĀ  government has toned down the penaltiesĀ  and a tax invoice fraud will attract a penalty of Rs 200 instead of the earlier penalty equivalent to the tax payable.

Assessees can correct their returns within six months from the date of filing. Also, prosecution will now be permitted only by a commissioner instead of a deputy commissioner of the CTD.

These measures, plus the increase in the upper limit of the no-tax slab to Rs 5 lakh turnover from Rs 3 lakh, have served to reassure the trader community in the state.

Last week's approval of the State VAT bill, by the state Assembly by a voice vote without even discussing the contents, went almost unnoticed.

Andhra Pradesh enacted its own VAT legislation in March 2003. But the government put off the implementation because of lack of convergence in the VAT Bills on some important recommendations made by the Empowered Committee of state finance ministers.

The state government had initiated an elaborate exercise on the transition to new tax regime in 2000. The VAT software for the CTD was developed by Tata Consultancy Services, which has now been modified in line with the new Act.

"We are fully geared up to implement VAT from April 1, 2005," P Vivek, joint commissioner of CTD told Business Standard. As 70 per cent of the total revenue is expected to come from VAT, the department has set up Large Tax Payers' centres for better coordination and assistance.

The tax authorities also took care to interact with the trade bodies, besides holding meetings with traders in the districts to inform them about VAT. Of the 4 lakh dealers in the state, only about 1 lakh traders are in the compulsory VAT assessment category.

The department initially provided training on VAT matters to over 100 sales tax consultants. They in turn spread the word. Indirectly, about 10,000 sales tax practitioners were exposed to the interactive exercise, officials said. Several private bodies in association with the department have conducted workshops on VAT.

These include Andhra Pradesh Chamber of Commerce and Industry, Chartered Accountants Association, sales tax practitioners association, Lions Club, Footware Manufacturers Association, Hyderabad-Secundrabad Retail Dealers Association, Hyderabad General Merchants Association, and Andhra Pradesh Marketing Federation (Markfed).

According to officials, the expenditure on the ongoing publicity campaign is being met by the Rs 1-crore grant given by the Centre for this purpose.

"Some of the states have simply enacted laws in line with the white paper of the Empowered Committee and did nothing to reach out to the businessmen and traders. That way, Andhra Pradesh stands out as a model in implementation of VAT system from April 1, 2005," a government official observed.

Madhya Pradesh

The Madhya Pradesh government has refused to implement the value added tax system in line with the decision of the ruling Bharatiya Janata Party.

While Chief Minister Babulal Gaur has been saying all along that the state would implement VAT only if it had no way out, the state government's publicity department has, however, been putting out quarter-page public awareness advertisements about value added tax in local newspapers.

The state government's Budget proposals too, assumed the implementation of VAT. State Commercial Tax Minister Kailash Chawla had also announced in the Assembly recently that VAT would be implemented in the state this April. Now the government is avoiding the media on the issue.

Political observer say that Gaur was facing opposition from his own colleagues on the issue and had submitted a memorandum to Union Finance Minister P Chidambaram opposing VAT.

Interestingly enough, Madhya Pradesh already has a "single point-VAT". The 9.2 per cent tax spells more harassment and extortion for traders than the proposed tax since they cannot reclaim the tax from customers.

"A number of traders in the state do not maintain records of sale and purchase of commodities in collusion with sales tax and commercial tax officials," a member of a local trade chamber told Business Standard.

Though regional heads of Confederation of Indian Industry and other chambers have demanded VAT from April 1, the local traders have been opposing it.

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BS Bureau in New Delhi
Source: source
 

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