NEW DELHI: The Federation of Indian Chambers of Commerce and Industry (FICCI) on Sunday expressed concern over the lack of uniformity in rates under the new value added tax (VAT) regime even after 10 months since its implementation by States on April 1, 2005.

Disparities

Pointing to the disparities in the levy on the eve of the meeting of the Empowered Committee on VAT, the apex industry chamber noted that different rates on similar products were defeating the very purpose of the new tax regime levy by obstructing seamless movements of goods across States. It has asked the empowered panel to correct the anomalies.

Even as the empowered panel is of the opinion that the divergence in tax rates are not too many, a survey conducted by the chamber covering various sectors such as food processing industry, fast moving consumer goods (FMCG), steel and metals, lubricants and petroleum products, fertilizers and chemicals revealed widespread disparity in VAT rates in various States.

Inevitable

"To take VAT to its logical end, it is inevitable that there should be uniformity among States in terms of its rates, rules and procedures," FICCI has said in a memorandum to the Empowered Committee of State Finance Minister on VAT, which is headed by the West Bengal Finance Minister, Asim Dasgupta.

On the basis of the survey feedback, FICCI has suggested that a definition of processed food, including the developments taking place worldwide in this arena, should be prescribed so as to avoid unwarranted litigation in the food processing industry.

Also, in view of the lack of uniformity in VAT rates for feminine and infant FMCG products, the chamber has urged the empowered panel to revise the rates and if need be, exempt these products from VAT regime in line with CENVAT exemption.

Inconsistent levy

The chamber has also pointed to the marked inconsistencies that exist in the methodology of levying VAT on `Ayurvedic' medicines. While some States charge a VAT rate of four per cent, some others levy the tax at six per cent over the maximum retail price (MRP). In the case of tea, the chamber has urged the empowered committee to persuade States such as Andhra Pradesh, Bihar and Orissa to levy VAT at four per cent in keeping with the levy imposed by other States.

Similarly, in the case of pure ghee which attract four per cent VAT in some States and 12.5 per cent in others, FICCI said that the product should be uniformly brought under the VAT rate of four per cent. As for branded bread and salt (processed and branded), the chamber said that the empowered panel should ask States to implement its decision to exempt these items from VAT.

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