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Fall into line on VAT: trade and industry

By V. Jayanth

CHENNAI, APRIL 2 . The April 1 deadline has come and gone. Twenty States have changed from the sales tax regime to the Value Added Tax (VAT). Tamil Nadu remains in the minority group that has opted to stay out of the new tax system, at least for now.

It is now in the company of the Bharatiya Janata Party-ruled States, and Uttar Pradesh, which decided against VAT.

While the BJP-governed States took the line that some of them had "primary products" as the base, with not much value addition, the Tamil Nadu Government wants a consensus before changing over to the VAT.

The BJP leader and former Finance Minister, Yashwant Sinha, concedes that there are political overtones to the economic issue and blames the Centre for not consulting the main Opposition front.

Most of the trade bodies in the State and the industrial sector want the VAT regime so that they will remain competitive with the neighbouring States.

But a few associations of small traders have vehemently opposed the new tax and led a nationwide agitation against its implementation.

Trade and industry circles are trying to step up lobbying for the introduction of VAT in the State.

They argue that Tamil Nadu will be an island in the south, with its rivals — Karnataka, Andhra Pradesh and Kerala — switching to the new system and gaining an advantage. Teething problems can be solved locally, say trade and industry sources.

`Don't miss the bus'

"Tamil Nadu is among the highest taxed States, with the tax going up as high as 22 per cent with surcharge and other taxes for some items. This should come down to 4 per cent under VAT. We have to look at the big picture and not be concerned with local problems such as possible harassment or a section of traders not wanting to come into the tax net. Such an industrially advanced State should not miss the bus now," argues a spokesperson of the Confederation of Indian Industry (CII).

`Assembly can debate'

A functionary of a city chamber says it is touch with the Government. "We have suggested that there can be a debate in the Assembly, which is now in session, to bring about the consensus the Government is seeking. None of the political parties have opposed the VAT. If there is a debate, say, next week, and all parties participate in it and endorse VAT, the legislation can be passed in time for the switchover to the VAT at least by June 2005," he reasons.

`Why CST?'

Some trade bodies supporting the VAT wonder whether the Central sales tax should continue for two years as part of the "phasing out" programme the Centre has announced. If the VAT has come into effect in 20 States, why should they also pay CST at 4 per cent or a reduced 2 per cent before it is phased out? Those opposed to the measure say they will not accept it at any cost.

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