Philippine Vat law suspended; new setback for Arroyo
The Philippine Supreme Court suspended a value-added tax law at the center of embattled President Gloria Arroyo’s plan to curb government debt that’s tripled in seven years and which prompted Fitch Ratings to raise its outlook on the nation’s junk debt rating in May.
The law, which extends the tax to fuel and other previously exempt products, is suspended while judges decide on at least four petitions to strike it down, the court said in a resolution received through fax and confirmed by spokeswoman Gleo Guerra.
The law was passed in May and took effect today. The petitioners asked for it to be struck down because of what they say is an unconstitutional provision that gives Arroyo the authority to raise the rate to 12 percent in January next year from the current 10 percent. The suspension is yet another setback for Arroyo who is facing calls to resign over allegations she rigged last year’s presidential vote count.
More: financialexpress.com
7/1/2005
Vat panel to meet by mid-July: Dasgupta
The empowered committee of state finance ministers on Vat will meet by mid-July to discuss issues arising after three months of implementation of the new tax regime in 21 states.
“We will meet by middle of July. The exact agenda for the meeting is being finalised,” empowered committee chairman Asim Dasgupta said here.
However, empowered committee member secretary Ramesh Chandra said the meeting would discuss compensation formula for those states making losses because of Vat implementation, impact of new tax system on prices and ways to make Vat more consumer-friendly.
In short, implementation issues will be the agenda of the meeting, he said.
More: financialexpress.com
6/28/2005
‘VAT is only going to bring greater transparency’
The much-awaited, discussed, debated and deferred several times, Value Added Tax (VAT), supposedly one of the biggest Indian tax reform since independence, got introduced on April 1, 2005 in 20 Indian states. The remaining states are yet to decide whether or not to adopt it but it appears they may introduce it soon. Hitesh Sharma, Partner, Ernst & Young, talks to Divya Nair about the present status of the VAT regime, the differences in opinion surrounding its implementation across the country, and impact on the pharmaceutical industry in India.
What’s the present status on the VAT implementation?
VAT, as the name indicates, is a tax on Value Addition and thereby is applicable on all the stages of sales and services involved in the transfer of property in goods, till it reaches the consumer. VAT can be called a multi-point tax system. Under VAT there are only four rate structures, that is: zero per cent, one per cent, four per cent and 12.5 per cent, with no additional tax or surcharge, as was applicable under sales tax. It is a simplified form of tax allowing full input tax credit on the procurements and capital goods, except for a few restrictions, which differs from state-to-state. 20 of India’s 34 states and union territories have decided to adopt VAT. However, the system has yet to be implemented in states like Uttar Pradesh, Tamil Nadu and Uttaranchal. The MRP-based regime is presently being followed by six states-Maharashtra, West Bengal, Orissa, Assam, Karnataka and Kerala.
More: expresspharmapulse.com
6/24/2005
Taskforce to draft new policy for Orissa SEZ
The state government has set up a taskforce under the chairmanship of chief secretary Subas Pani to formulate a new state policy for the special economic zone (SEZ).
“The formulation for a new SEZ policy became inevitable as the SEZ Policy 2003 has become redundant because of the introduction of Value Added Tax (Vat) and also the Centre’s proposal to enact a low for SEZ at the country level”, said Mr Pani. According to him the task force would submit its report within three months time.
The development commissioner, agricultural production commissioner, principal secretary finance, principal secretary steel and mines, principal secretary industries, secretary law and secretary labour will be the members. The principal secretary industries would act as the member secretary of the taskforce.
Orissa has got clearance from the Centre for setting up of two SEZs in the state. While the Paradip SEZ, promoted by the state government, is being located at Dubri in Jajpur district, the Gopalpur SEZ is being developed by the Tatas on the site it acquired in the late eighties for the location of the steel plant near Gopalpur port in Ganjam district.
More: financialexpress.com
6/14/2005
‘Market forces will pull states towards Vat’
The government on Friday said eight states that had not implemented the value-added tax (Vat) system would be pressured by economic forces to switch over to the new tax system. Since rates in the states implementing Vat were, in general, lower than in non-Vat states, manufacturers would tend to access more inputs from the Vat states and supply more finished goods to them, Parthasarthy Shome, advisor to the Finance minister, said at an Assocham seminar.
“Pressure from manufacturers and consumers will make these states implement Vat. It will be interesting to see if trade shifts from non-Vat states due to these factors,” he said. Uttar Pradesh, Uttaranchal, Tamil Nadu, besides five BJP-ruled states of Gujarat, Madhya Pradesh, Rajasthan, Chhattisgarh and Jharkhand have not implemented Vat. It was unfortunate that the states, which were technically prepared to switch over to Vat, had decided to opt out of it at the last moment, Mr Shome said.
He said talks were on with these states to join the Vat bandwagon but refused to elaborate further. “Since the issue falls under the jurisdiction of the empowered committee, it is not for me to disclose the strategy to persuade the eight states to join the Vat system,” he added. Mr Shome reiterated there was no reason for Vat to be inflationary, if the benefits of input credit were passed by manufacturers to distributors.
However, if manufacturers did not pass the benefits to the next stages, consumers would have to pay more, he said, adding the whole purpose of Vat was to bring distributors, traders, including retailers, into the tax net.
More: financialexpress.com
5/27/2005
Oil products may attract Vat from next fiscal
Petroleum products may attract value added tax (Vat) from next fiscal as is implicitly recommended by mid-term appraisal of the 10th Plan, empowered committee secretary Ramesh Chandra said on Sunday.
“We are not averse to imposing Vat on petroleum products, but we are for gradual expansion of Vat list. As they say, we hasten but slowly,” Mr Chandra told PTI here. At present, petrol and diesel are out of Vat, while LPG attracts Vat at 12.5%.
MTA, approved by the Cabinet on May 19, pointed out that many goods have been kept out of Vat, including petroleum products, which are basic to manufacturing and transport.
The report will now be put before the National Development Council (NCD) for approval. The meeting of NDC is likely to be held next month.
Explaining the rationale of keeping petroleum products out of Vat, the white paper released by finance minister P Chidambaram said that prices of these products are not fully market-determined.
Source: financialexpress.com
5/5/2005
VAT: More queries answered
The government recently introduced Value-Added Tax (VAT)—meant to be a simplified indirect tax on retail sale activity.
Proposed as a simplified tax, retailers complained it was hard to understand. Following extensive initial resistance—5 lakh retailers shut shop in March and April—the idea today is more or less accepted and implemented on the ground.
To demystify VAT, Newsline initiated a Q&A interface where traders could write in with questions on the new tax regime, to be answered by Maharashtra’s Sales Tax commissioner B C Khatua. After Khatua answered a first round of questions, readers responded with more.
Khatua replies:
Corporate: Will dealers get full VAT credit for the tax they pay or will there be limitations?
Khatua: There will be no limitations if traders maintain proper records.
Consumer: Are essential commodities taxed under VAT in other VAT-adopting countries. If not, why have we taken that route?
Khatua: Essential commodities have not been legally defined.
Globally, the number of tax-exempted goods under the ‘‘essential’’ categorisation has increased as the economy grows, which India will replicate.
As for the current rates on essential goods, those absolutely necessary for survival and consumed daily by the poor have been exempted. Those slotted under 4 per cent are goods where technology can increase shelf-life and which can benefit from market situations.
Retail Traders’ Association: By when will the other taxes and octroi be abolished and integrated into VAT?
Khatua: VAT will work only when it fully integrates into one principal tax base. Integrating Excise and Service Tax at the Centre and state levels itself has taken a lot of time. To expect the Brihanmumbai Municipal Corporation to forgo octroi—its main source of income—is unfair.
More: cities.expressindia.co
Vat on life-saving drugs to continue
The government has dropped the move to exempt life-saving drugs from the purview of the value added tax (Vat). They will continue to attract 4% tax. While states will have the freedom to make exceptions to this rule for a select list of medicines, the empowered committee of state finance ministers has decided not to notify drugs in the category of goods exempted from Vat.
At its meeting here on April 26, the empowered committee had resolved to firm up a list of life-saving drugs in the wake of the proposal made by some states to exempt at least some commonly used medicines from Vat.
On that day, the panel had also announced the decision to add a small number of items including salt and bread to the original list of 46 items eligible for exemption. Also, Vat on medical equipment and devices was cut from peak rate of 12.5% to 4%. But a final decision on the proposal to keep drugs out of Vat could not be taken. “There will not be further exemptions,” Ramesh Chandra, the panel’s member secretary said on Wednesday.
More: financialexpress.com
5/2/2005
Lukewarm response to Vat bandh
The one-day traders strike against Vat failed to evoke much response on Friday across the country with some wholesale markets remaining close in four states but retailers carried out normal business.
The strike, called by Bhartiya Udyog Vyapar Mandal (BUVM), was observed by in a few wholesale market in Delhi, Uttar Pradesh and West Bengal. The strike was successful in Jammu & kashmir.
Traders staging protests against Vat they alleged it would lead to corruption, inflation and help multinational corporations at the expense of small traders.
BUVM also submitted a memorandum to Prime Minister Manmohan Singh.
“We have submitted a memorandum to PM asking for his intervention to defer vat,” BUVM president Shyam Bihari Mishra told PTI here.
BUVM has also asked singh to constitute a committee of central ministers to study the feasibility of Vat implemented in 21 states without the consent of traders, he said.
In Delhi, many business establishments in Chandni Chowk, Azadpur vegetable market and 40 wholesale commodity markets kept their shutters down in response to bandh. It was business as usual for retailers.
In Uttar Pradesh, all wholesale markets including foodgrains, oil and oilseeds, sugar, iron and steel cloth and bullion markets remained closed, several shops and business centres in the retail markets remained open.
However, retail shops, medical stores, petrol pumps, restraurents and hotels were open and private transport were functioning normally.
More: financialexpress.com
4/25/2005
The software side of VAT
Companies are busy working out the impact of VAT (Value Added Tax) while politicians are still arguing about it. 21 of India’s 38 states and union territories have decided to adopt VAT. Vendors selling ERP and accounting software are busy helping organisations fix their IT systems. Most of the vendors have released changes that can be used by existing customers to make their IT systems VAT-compliant.
With the new regime, organisations need to modify their existing systems to accommodate VAT, re-organise supply chains, and optimise them vis-à-vis the new taxation structure. For example, many companies had set up their manufacturing plants or warehouses such that they could benefit from the tax variations between states. With VAT, the advantage may shift to companies that have warehouses near their factories or showrooms.
“To sustain or improve margins, companies will have to re-evaluate their supply chain structure and decide to close or open new offices or warehouses. This will create new opportunities, but it’s difficult to predict the market size,” says Ravi Kathuria, Director, Marketing, SSA Global India. Organisations are re-doing their costing and inputs before looking at the whole structure.