VAT yet to see prices dip
A month after Value Added Tax (VAT) was introduced in 21 states, confusion still prevailed and a “serious drawback” that has come to light was the heavy toll on manufacturers, economic think tank NCAER has said, reports PTI from New Delhi.
“In the market, there is still a lot of confusion regarding VAT. In fact, the prices of some of the commodities (like pulses), which are outside the VAT list, have increased. On the other hand, expected price decrease is yet to be seen,” it said in its quarterly report.
Further, “there is one serious drawback of the present VAT regime, which puts a heavy toll on a manufacturer,” the think tank said. Citing an example, NCAER said a manufacturer selling goods in multiple states will have to follow documentation of both VAT and sales tax of respective states. The manufacturer has to invest in IT support to maintain record books as per requirement of respecive states and would have to fix different prices for different states considering their tax rates.
“Thus, a manufacturers’ cost would increase with the implementation of VAT. It is a real possibility that he would pass the increased cost to the consumer,” it added.
On the likely impact of VAT in regions, NCAER said prices in South India are likely to fall but not in Northern India. The current sales tax levels in Southern markets for most consumer items are higher at 16-20 per cent compared to sales tax level of less than 12.5 per cent in Northern India. In Karnataka, for example, there was a sales tax of 20 per cent on refrigerators and air conditioners and 16 per cent on soaps and TV sets, which would be reduced to 12.5 per cent post-VAT. Consumer durables and electronic items and cosmetics are taxed at 12 per cent in Delhi and the increase would be negligible to 12.5 per cent post-VAT.
More: deccanherald.com