The Hindu : New Delhi News : Claims against VAT rubbished

Online edition of India's National Newspaper
Friday, Dec 24, 2004

New Delhi

New Delhi

Claims against VAT rubbished

By Our Staff Reporter

NEW DELHI, DEC. 23. Apart from being dealer-friendly, the new Value Added Tax (VAT) regime, to be implemented from April 1, 2005, will not only put an end to "inspector raj'' and eliminate the prevailing corruption and tax evasion, but also put an end to the continued visits of the dealers to Sales Tax offices and ensure that the Department disposes of appeals within a specific time limit.

Similarly, as against three slabs of 4, 8 and 12 per cent in the present sales tax regime, the VAT regime would have only two slabs of 4 and 12.5 per cent. A large number of commodities presently falling under the 8 per cent slab would come down to 4 per cent, thereby causing a downward pressure on prices. Items that are being consumed by the poor are being considered for exemptions. However, for a few items, the special rate of 20 per cent will remain in force. These include petroleum products and kerosene oil, liquor including country liquor, narcotics, rectified spirit, lottery tickets and aerated drinks.

Terming the rumours that VAT would affect the smaller traders badly, the Sales Tax Commission, Rajni Kant Verma, informed that the apprehension was unfounded. "The threshold for registration is Rs. 5 lakh and we are suggesting that the threshold be kept at Rs. 20 lakhs so that small dealers do not have to register.''

He also pointed out that the cost of compliance would come down due to self-assessment. Dealers would not have to approach the Department for statutory forms or for assessment.

Stating that a lot of misgivings are being floated about VAT regime, Mr. Verma said the document and papers that the dealers were maintaining under the present regime would suffice.

Rubbishing claims that VAT would disturb the distributive character of Delhi, the Sales Tax Commissioner who has revolutionised the revenue collections in Delhi, said lowering of Central Sales Tax rate, input credit and credit for capital goods would reduce the cost of business and improve the margin of traders. They would also be required to maintain invoices and normal documents that they are doing in any case under the present regime. There was no compulsion to provide any specific audit for VAT. Even today it is mandatory for all the firms whose turnover exceeds Rs. 40 lakhs to get their account audited.

Mr. Verma said scrutiny would only be undertaken in 2 to 5 per cent cases after detailed assessment of the profile of the trade and trader. It would be based on analysis of risk of evasion probability and propensity of evasion through MIS and source based information. On the issue of refund of tax, Mr. Verma said provision had been made in the legislation for refund of tax within six months time frame. In many other States this period is more than a year. Mr. Verma said the present system had many complications resulting in a lot of litigation. There is also a lot of harassment on account of forms and misuse of forms.

Under the VAT system, no forms would be used and the dealer himself would issue the tax invoice. There is also an automatic stay system in the new regime and the disposal of such appeals has to completed within in three months time otherwise the case would be automatically decided in favour of the dealer.

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