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As a speaker at seminars organised for
professionals and by trade associations in different parts
of the State, I am fortunate to interact with fellow
professionals as well as with the business community. Though
the introduction of VAT is just 6 months away, the level of
awareness of the shape of things to come is very low, even
among professionals and some of the assessing officers.
Like most of you, I am trying to
understand the implications of the introduction of VAT to
replace the present system of levy of sales tax. I look upon
the opportunity to write this column as a means to update
myself and to share with you my impression. I do not intend
to write on theoretical aspects of VAT, different forms of
VAT etc. Let us leave such serious stuff to the economists
and academicians. To put in simple terms, VAT is a
multipoint levy with a provision to set off the tax paid on
the purchase of Inputs.
Is the introduction of VAT a taxation
reform or just a change in the system of levy of tax is a
debatable issue. I plan to write more on this in my next
article, " IS VAT THE IDEAL REPLACEMENT FOR THE PRESENT
SYSTEM OF LEVY OF SALES TAX?".
All those who oppose the introduction of VAT should
better face reality and focus their energies on implementing
a practical VAT balancing the interests of Tax
Administrators, traders, Manufacturers, exporters and the
most important tax paying public.
Meaningful discussion and a clear picture will emerge
only after the States announce the Draft VAT Act, the rates,
the list of exempt goods, schedule of goods etc.
TOPICS TO BE COVERED IN THIS
COLUMN
Based on the study of the information available, some the
topics I have planned to write on are the following:
1. Is vat the ideal replacement for the present system of
levy of sales tax ?.
2. Does the denial of input credit
on interstate purchases violate the Constitution ?
3. VAT and exporters
4. VAT and manufacturers
5. VAT and traders
6. Deemed sales in VAT
7. VAT and CST Act.
ARE GOVERNMENTS READY TO IMPLEMENT VAT?
The important question at this juncture
is, are the State Governments (except a few States like
Maharastra, Andhra Pradesh, Karnataka and Madhya Pradesh)
ready to implement VAT from April 1,2002. The tasks before
the Governments are
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Finalise VAT policy.
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Issue discussion paper, consult trade bodies on VAT
policy.
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Draft VAT Act, Rules and Forms.
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Issue discussion paper, consult trade bodies on Draft
VAT Act, Rules and Forms.
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Enact VAT Act, Rules etc.,
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Educate trade by organising seminars
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Train staff on VAT rules and procedures
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Computerise VAT registration and assessment procedure.
Further the harmonised system of
nomenclature of commodities is an essential prerequisite.
The codification of the commodities as described in the
present Schedules should ideally be made available for
public discussion and finalised before introduction of VAT.
EARLY ANNOUNCEMENT OF DECISION TO IMPLEMENT OR POSTPONE
REQUIRED
The trade has now been mentally prepared
for the inevitable change over to VAT. What the trade is
really looking for is sufficient safeguards, checks and
balances to ensure that the interest of small traders is
taken care of without casting any additional burden in terms
of record keeping and supervision and inspection by
officials. The traders do welcome VAT upto the manufacturing
level. Even the introduction of VAT upto manufacturer's
level without proper preparation will do more harm than
good.
Several trade bodies have already organised
conferences requesting for either postponement or opposing
introduction of VAT on traders. There is real doubt on the
preparedness of the Government to introduce VAT by April 2002.
The Governments should clear the air by making definite
announcement of its plans for VAT.
Most of the decisions relating to VAT like
the threshold limit, list of exempt goods, should VAT be
applied to traders etc., are more political decisions than
administrative. Early announcement of the decision to
implement by April 2002 will take a lot of pressure on
drafters of the VAT law and the business community. I can
imagine the predicament of those assigned with the
responsibility of drafting the VAT Act.
Considering the level of preparedness of
different States, the deadline of April 1, 2002 should not be
considered sacrosanct. The tax administrators should desist
from forcing any legislation without proper discussion with
taxation professionals and the trade. Resistance to VAT from
certain quarters is more out of fear of the unknown.
Therefore, unless and until the State Governments do their
homework properly and are confident of managing the change,
the Governments should be candid enough to admit so and
collectively decide to postpone the implementation by one
year.
If postponement is planned, let it be
announced early so that wasteful expenditure and human effort
on opposing VAT may be harmonised to collectively prepare for
the smooth transition to VAT.
TIME TABLE FOR THE TASK AHEAD TO BE ANNOUNCED
If VAT is planned by April 2002,there is
an urgent need to disseminate information on VAT and make
available the draft VAT Act, Rules, Forms and procedures at
least by 30th October 2001, so that a proper
legislation can be finalised by December 2001 and
implemented by April, 2002.
Thank you for being with me. I shall be
back again next week on 21-09-2001. Please join me on
21-09-2001 for more. Until then BYE!
S.SRIDHARAN
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