CHENNAI: Tamil Nadu switched over to the value-added system of taxation on Monday from the general sales tax regime, a shift a large section of trade and industry in the State had been looking forward to for some years.

The introduction of VAT, however, was marked by protest by a section of traders, confusion about the taxation status of stocks in hand and reports of a possible increase in the prices of hotel food.

Seeking to clarify the position, the State Government issued a communiqué stating that even under VAT, non-star hotels with a turnover above Rs. 50 lakh would attract the two per cent levy as was the case under the Tamil Nadu General Sales Tax.

With the additional sales tax and surcharge abolished under VAT, prices of food items would come down. All measures were being initiated to ensure that prices of essential commodities did not increase, the release said.

Another official release said the cost of all medicines was bound to come down under VAT as the levy on them had come down, from the TNGST rate of 10.5 per cent to four per cent.

Moreover, a set off of the tax on all medicines lying in stock up to Sunday had been granted.

An inquiry by the Drugs Controller found that adequate quantity of medicines was available in shops. In the event of any chemist declaring no stock in view of VAT, the public should call the Drugs Controller office on 24321830/24335068.

Day one of the new tax regime saw the Commercial Taxes department notifying the TN VAT Rules and issuing several notifications. One of them reduced the rate of tax to two per cent of the taxable turnover on sale of ready-to-eat unbranded foods, including sweets, by non-star hotels and restaurants, sweet stalls, clubs, caterers and other eateries.

Two other notifications granted tax exemption under VAT on second and subsequent sale of kerosene under the public distribution system to family card holders by wholesale/retail distributors/fair price shops and on second and subsequent sale of liquefied petroleum gas for domestic use to the consumer by any distributor other than an oil company.

Another notification gave exemption on the second and subsequent sale of fertilisers by any dealer to farmers.

Notifications, including those listing life-saving drugs that would be exempted and defining industrial inputs that would attract four per cent tax, were issued.

Apart from the notifications, the TN VAT Rules were published on www.tnvat.gov.in, website of the department.

The list of goods used by physically challenged persons that would be exempted include electrical hearing aids and hearing aid cords, crutches, wheel chairs, support sticks of all materials, prosthetics, artificial limbs and parts and three wheelers with or without motor.

A notification specifying khadi garments/goods that would be exempted under VAT was also made.

Pollution control equipment would be taxed at four per cent.

Word processing machines, electronic typewriters, microphones, multimedia speakers, telephone answering machines, IT software of any media, transmission apparatus other than those for radio or television broadcasting are some of the items specified under the notification defining the IT products liable to attract four per cent VAT.

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