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In defence of VAT

By Our Special Correspondent

THIRUVANANTHAPURAM, APRIL 4. The Government is virtually flooding the scene with literature on Value Added Tax (VAT) in an effort to bring the traders around.

It has followed up a 13-page material on VAT which it issued on Friday with a two-page addenda in praise of VAT on Saturday.

VAT is not an additional tax, says the headline. The text that follows describes it as something that will bring an end to the tax on tax. It is the first step towards the unification of tax rates at the national level.

The rest of the special press release paints a rosy picture of the new tax regime. Here are some excerpts:

The tax will cover only the hike during various stages, from production to consumption.

The tax rates will be reduced and the tax paid on inputs during various stages of production and distribution will be returned.

The present system of imposing tax on tax and its cascading effect led to vagueness and made things complex.

There will mainly be only three rates of tax — 1, 4 and 12.5 per cent respectively. There is no tax for export items.

Forty-six items used by the common man on a daily basis like plantain, vegetables, fish and meat have been fully exempted from tax.

Petroleum products and foreign liquor have also been excluded from VAT.

The registration system is simple, short and transparent.

There is no additional commitment for registered traders to register under VAT.

The Government will make suitable arrangements to enable the traders to overcome the difficulties thrown up by the implementation of VAT.

Concession will be given for the stock prior to the switchover to VAT if the details regarding it are furnished correctly.

The Government's bid is to project VAT as the best tax system in the world. The traders have portrayed it as a hideous creature. The real picture may unfold in the coming days. Only then will it be clear whether the common man stands to gain or lose.

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