The Hindu : New Delhi News : VAT Bill introduced in Delhi Assembly

Online edition of India's National Newspaper
Tuesday, Dec 21, 2004

New Delhi

New Delhi

VAT Bill introduced in Delhi Assembly

By Our Staff Reporter

NEW DELHI, DEC 20. Giving a clear indication of the Sheila Dikshit Government's resolve to go along with countrywide reforms in the taxation sector, Delhi's Finance Minister, A.K. Walia, today introduced the Value Added Tax Bill in the State Assembly for consideration of the House.

After the introduction of VAT regime from April 1, 2005, the Delhi Sales Tax Act 1975, the Delhi Sales Tax on Works Contract Act, 1999, The Delhi Sales Tax on Right to Use Goods Act, 2002, and the Delhi Tax on Entry of Motor Vehicles into Local Areas Act, 1994, would stand repealed. Terming it as a progressive taxation regime, Dr.Walia said the provisions of the Delhi VAT Act were forward-looking and provided for self-assessment by the traders. The Bill also provides for the time limit for disposal beyond which the matter is automatically decided in favour of the dealers.

Supporting the introduction of the VAT Bill amid opposition by the Bharatiya Janata Party members, the Chief Minister said it was unfortunate that BJP members were now opposing the Bill but had supported it when it was introduced during the NDA regime. She pointed out that the April 1, 2005, deadline for implementation of VAT was fixed by the previous NDA Government and the Delhi Government had at that time made it clear that it would oppose any clause that disturbs the distributive character of Delhi and its markets.

The introduction of VAT all over the country had been necessitated by the need to modernise the tax administration and re-design tax policy in view of the increasing globalisation of the economy. Further, the ill effects of tax cascading erode competitiveness and this was a matter of nation-wide concern. The VAT system is considered the best available option and tax is to be collected at very point of transaction. The VAT system is fair, simple and has in-built features that improve compliance. The Empowered Committee of State Finance Ministers has also recommended this system. The VAT system of taxation reduces the compliance cost for taxpayers and administrative cost for the Government. The news system is also intended to ensure that the Delhi Government realises the tax due on consumption of all goods taking place in Delhi. It also seeks to provide a level playing field to honest, tax complying traders.

At present, sales tax is the single largest source of revenue for the Delhi Government and accounts for about 70 per cent of the total tax revenue. The present sales tax system as it exists today is a fist and last point tax system having number of problems. The first point tax system implies collection of tax on a much smaller base and encourages tax transfer pricing to avoid taxation. It also causes inefficiency in the economy due to the cascading of tax. The last point system place excessive burden on the administration of statutory declaration forms, receiving and accounting. Moreover, the system is highly evasion prone because the entire liability is on the weakest link of the chain. The present system also imposes very high compliance cost on taxpayers in term of visits to the department and creation of undue liability when forms are not received.

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