The Hindu : Business : White Paper on VAT soon

Online edition of India's National Newspaper
Tuesday, Dec 14, 2004

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Business

White Paper on VAT soon

By Our Special Correspondent

NEW DELHI, DEC. 13. The White Paper on value added tax (VAT) would be ready by this month-end and the draft has already been prepared.

Revealing this, the Chairman of Empowered Committee on VAT, Ashim Dasgupta, who is also the Finance Minister of West Bengal, said that the committee at the national level has also decided to set up a consultative group with representatives from all major industry bodies and trade organisations.

Mr. Dasgupta, who was addressing the stake holders at a seminar on "Design of VAT and its implementation' organised by the Confederation of Indian Industry (CII), announced that the implementation of VAT, which was long awaited, and was viewed as one major step towards tax rationalisation, would go ahead as scheduled from April 1, 2005.

Most of the States were fully prepared with the legislation. "We are also expecting the Presidential assent of draft legislation submitted by various States soon," he commented. He also said that efforts were on to make the rules and regulations of VAT simpler and added "in all major States to the level of CTOs are being computerised."

In what could be seen as a positive step by the Indian industry, he remarked that the Empowered Committee has decided to allow States to continue with the existing incentives even after the implementation of VAT regime. "But the VAT chain should not be disturbed," he added.

At present, three types of sales tax incentive schemes are in place in different States — exemption, deferral and remission schemes. Under the exemption scheme, purchase of inputs and sale of finished goods manufactured by the unit were exempt from tax, he said. Under VAT, the manufacturer would have the advantage of coming up with a lower price, thus benefiting the consumer as well as the Government. He told those present that with the implementation of VAT, CST would continue at 4 per cent in the first year and would be phased out from second year onwards after implementation of VAT, and it would "lessen the burden."

"Other taxes such as additional sales tax, surcharge on sales tax, turnover tax, will be abolished. If octroi remained, there had to be a set-off for it, said Mr. Dasgupta adding that an effort was on to replace the so-called Inspector Raj with self-assessment, wherein there would be an in-built check, based on transparency and mutual trust.

With regard to specific provisions under VAT, he announced that for capital goods, if investment were up to Rs. 1 lakh, immediate credit would be allowed. In cases where investment was more than Rs. 1 crore, tax credit would be in 36 months. Credit for stock-in-hand would be allowed for stock up to one year, he said.

As regards rate-wise categorisation of different commodities, he mentioned that 270 items comprising basic necessities, primarily all inputs — agricultural and industrial and all declared goods have been brought under 4 per cent VAT category.

In his remarks, Parthasarathi Shome, Adviser to the Finance Minister, commented that the implementation of VAT would benefit the industry as it gave credit for input tax paid. He said that the framework worked out by the Empowered Committee had kept the interest of States in mind.

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