VAT rates different across all items in states
The design of Value Added Tax (VAT), implemented by 21 states, suffers from major flaws that services are excluded from its purview and rates are not uniform across all items in states, credit rating agency ICRA has said.
“A grievous shortcoming of the base (of VAT) is non-inclusion of services,” ICRA said in an ariticle in its latest bulletin on money and finance.
Whether the base of state VATs can be integrated fully with the tax on services eventually is not clear, the credit rating agency said.
Though VAT was expected to be fairly comprehensive, the number of commodities exempted from VAT in various states is not that small due to pressure from various quarters.
Certain categories of sellers of taxable commodities are being exempted such as the defence canteens run for army personnel, a practice that militates against VAT.
Even after the new state VAT laws were made operative, the states are not strictly adhering to the VAT lists.
In several states, many items have been brought down from 12.5 per cent to 4 per cent and in the case of several commodities from 4 per cent to zero per cent, ICRA said adding the process of shifting the items from higher to lower rates is continuing.
More: deccanherald.com