‘VAT had no impact on consumer prices’
According to Finance Minister Mr Chidambaram one could not draw any definite conclusion on the effects of VAT based on just first quarter results.
The introduction of Value Added Tax (VAT) system in states replacing sales tax has made no adverse impact on consumer prices and revenue earnings under the new tax regime have shot up by 15.3 per cent during first quarter of current fiscal, Finance Minister P Chidambaram said on Tuesday.
Studies conducted by trade bodies have shown that introduction of VAT has no adverse effect on prices in the country and both Wholesale Price Index (WPI) and Consumer Price Index (CPI) have come down to under four per cent, he said while replying to supplementaries during Question Hour in the Rajya Sabha. He said while WPI at 3.84 per cent is the lowest in two years, the CPI has been veering around 3 to 3.5 per cent.
Mr Chidambaram said the rate of increase or decrease in tax revenues after introduction of VAT depended on corresponding sales tax rate that prevailed before introduction of the new tax regime. The Finance Minister said no definite conclusion could be reached about effects of VAT based on the first quarter results.
More: deccanherald.com
8/8/2005
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.
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7/20/2005
The taxing VAT
Value Added Tax or VAT in simple terms is the tax on sales payable by a dealer for the relevant tax period on the goods sold by him within the State subject to adjustment of tax paid by him on the purchases of such goods within the State and or tax paid by him on purchases of inputs within the State for manufacture of such goods. The tax on sales as mentioned above is termed as “output tax”, whereas the tax on purchases is termed as “input tax”.
In case of inter-state sales, the dealer is liable to pay Central Sales Tax (CST) and not VAT. But he cannot adjust from the CST payable the input tax paid by him. However, the input tax paid in respect of inputs for CST sales are eligible for deduction on the output tax payable by the dealer.
In case of exports, as no VAT is payable, the dealer is eligible to claim the refund of the input tax relating to such exports. This is applicable even if the dealer exports tax exempted goods.
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6/14/2005
Governors’ meet to discuss VAT, security, tsunami
State Governors from all over the country will meet here on June 14 and 15 to deliberate on various vital issues including the concept and economic implications of the controversial Value Added Tax (VAT), border management and the overall national security scenario.
Governors from 28 states and three Lt Governors will attend the Conference which will be presided over by President A P J Abdul Kalam.
The Conference was earlier scheduled to be held in February but was postponed after President Kalam sustained a fracture in his shoulder.
The conference, which will be held at Rashtrapati Bhavan, will also be attended by Vice President Bhairon Singh Shekhawat, Prime Minister Manmohan Singh and his cabinet colleagues Pranab Mukherjee (Defence), Arjun Singh (HRD), Shivraj Patil (Home), P Chidambaram (Finance) and K Natwar Singh (External Affairs) and Planning Commission Deputy Chairman Montek Singh Ahluwalia.
Among other issues that will be discussed are law and order, effective disaster management strategies, particularly tsunami, the road map of perspective development planning under the Tenth Five-Year Plan and effective and gainful utilisation of Governors as Chancellors in the governance of Universities.
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5/2/2005
No change in VAT tax slab for a year
The VAT panel has ruled out altering tax slabs for one year as demanded by some states like Uttar Pradesh and Delhi, saying frequent changes in tax categories would lead to collapse of the new tax system.
Uttar Pradesh and Delhi raised the demand at the Empowered Committee meeting on April 26 to add one more rate of 6 or 8 per cent in between the existing 4 and 12.5 per cent in the VAT system, sources said.
But they were told that it was not possible to have three main rates so soon since VAT was implemented by 21 states from April only.
In fact, Uttar Pradesh has included it in one of its demands for switching over to the new regime from the existing sale tax regime. UP Agriculture Minister Ashok Bajpai, the state representative in the VAT panel, said three main rates would make it smooth for Lucknow to opt for the new tax system.
There are items under 6-7 per cent sales tax in the state. “If we increase the rate on them to 12.5 per cent in VAT, producers, traders and consumers will be affected. And if we reduce it to 4 per cent, the state will suffer loss,” he added.
More: web.mid-day.com
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.
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4/13/2005
VAT will make India globally competitive
VAT will make India globally competitive
India can be globally competitive as a fully integrated market if all states adopt the Value Added Tax regime, Raja Chelliah, the architect of the VAT system said today.
“If all states adopt VAT, and at the central level there is already VAT. India will become a fully integrated market and this gives us a huge advantage,” Chelliah, currently the Chairman of Madras School of Economics, said here at the formal switch over to the VAT regime by Karnataka.
A noted economist, Raja Jesudas Chelliah headed the committee on tax reforms in the early 1990s that recommended implementation of the VAT system for a uniform tax regime.
He emphasised that India was not just competing with the developed nations like the US and in Europe, but also with low cost emerging nations in Latin America and China.
“We should take advantage of the uniform tax regime so that the economy of scales can be realised. This gives us a competitive advantage in the world economy,” Chelliah said.
He said the new tax regime, if adopted by all states, will also pave for a common market in the South Asian region and highlighted the need for phasing out central sales tax eventually.
More: sify.com