Saturday, Nov 23, 2002
Saturday, Nov 23, 2002 |
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Tamil Nadu
By Our Special Correspondent
While the VAT system would benefit manufacturers by way of credit for tax paid on inputs, it would lead to price rise for consumers and loss of revenue to the Government. He was addressing a regional conference on VAT organised here by the Federation of Indian Chambers of Commerce and Industry in the presence of the architects of the VAT agenda, Raja J.Chelliah and Prof. Mahesh Purohit. The Centre had failed to respond to queries sent by Tamil Nadu as also some other manufacturing States such as Maharashtra and Gujarat in respect of VAT. It was linked to the ``irksome'' issue of CST (levied on sale to registered dealers outside the State at a rate not exceeding four per cent). In the event of a phase-out of the CST, Tamil Nadu would lose Rs. 800 crores-900 crores every year, but the Centre was not prepared to compensate the States for more than 50 per cent of the loss. ``This issue is being politically decided by the Government of India. The Centre should (instead) decide matters in consultation with experts, traders and industry'', Mr. Ponnaiyan said. Loss of the CST revenue would come on top of a cut of more than Rs. 1,000 crores in Central devolution to Tamil Nadu on the ground that it was a developed State despite widespread rural unemployment, Mr. Ponnaiyan said. The Centre, like a colonial power, had reserved for itself the ``lucrative'' services of banking, insurance and telecommunication for taxation under the head of service tax, leaving only areas like hairdressing for taxation by the States, which faced the public directly and had to incur Plan expenditure and essential non-Plan expenditure. While all Chief Ministers supported VAT, the ultimate ``sufferer'' would be the consumer unless these issues were taken care of, Mr. Ponnaiyan said. He chided industry for claiming that VAT was vital for achieving global competitiveness. ``VAT alone will not help you compete with China. What is required is product quality, technology and research'', he said. The textile industry had done little to help the farmer improve cotton productivity. Earlier, Dr. Chelliah (who heads the sales tax reform committee of Tamil Nadu) and Prof. Purohit of the National Institute of Public Finance and Policy explained the advantages offered by VAT. At a technical session, while Tamil Nadu's representative, Debendranath Sarangi, explained that the Government had under its consideration a draft bill on VAT taking care of CST, consignment transfers, refunds, etc, the Andhra Pradesh representative, Ramesh Kumar, said his State considered VAT ``an elixir for industrialisation''. The sweeping reforms Andhra Pradesh was introducing included abolition of the concept of financial year and tax assessment by officials (assessment will be only self-assessment), nil fee for ST registration, payment of tax through e-seva kendras and refunds through banks, procedures, including for capital goods, based on the Central value-added tax (CENVAT) regime and a green card for large tax payers.
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