VAT will hit revenue collection

By Our Staff Reporter

NEW DELHI, JULY 31.

Delhi's Finance Minister, Mr. Mahinder Singh Saathi, today warned that introduction of the Value Added Tax (VAT) system in the Capital from April 1, 2002, could lead to a fall in tax collections and wanted the Centre to put a mechanism in place to meet any shortfall in revenue of States.

Mr. Saathi said he had taken up the matter with the Union Finance Minister, Mr. Yashwant Sinha, and asked him to come out with a concrete proposal as to how would the Centre compensate the States if there is a shortfall in the revenue collections. ``While the introduction of Uniform Sales Tax had led to increase in the revenue this year by 44 per cent, the department was expecting revenue neutrality during the transition period,'' he remarked. He was addressing a workshop on Sales Tax Reforms in Delhi organised by the PHD Chamber of Commerce and Industry here today.

He said the Delhi Government had decided to introduce VAT from next financial year but there could be problems on this front. The Department was making all the preparations to ensure smooth implementation of the new taxation system. In fact, he said no assessment of Sales Tax would be conducted during January, February and March 2002 as this period would be utilised to brace with the new system and tone up the Department.

Mr. Saathi said the basic objective of introducing VAT was to provide a simpler, transparent and assessor-friendly tax administration. It is expected that the new system would encourage tax compliance and reduce the incidence of evasion.

Asking the traders to come up with suggestions, Mr. Saathi promised that with industry fast fading out of Delhi, VAT design shall be so chosen that it is conducive to the distributive character of Delhi and encourage more economic activity. He assured traders that the Sales Tax rates would not be increased with the introduction of VAT.

He said the present sales tax system had many loopholes which encouraged leakage and also puts extra burden on the tax payers. It is expected that VAT would remove the hardships to the assesses and bring about simplification of tax structure as well as reduce litigation.

The former Sales Tax Commissioner and now Delhi Jal Board CEO, Mr. P.K. Tripathi, said that VAT, a universally accepted system, provided for a simple and uniform tax system with no additional burden on the tax payer. With the provision of set off, double taxation is avoided completely thus ensuring fair assessment. This was particularly essential in today's competitive economy where providing for quality goods at competitive price is the need of the hour.

Welcoming Mr. Saathi, the PHDCCI Delhi Committee Chairman, Mr. Anil Bhargava, said the most vital issues in introduction of VAT was to fix moderate rates, widen the base and integrate other local levies. This would eliminate multiplicity of taxes and help in ensuring higher revenue. The vice president of the Committee, Mr. Arun Kapur, said till the time VAT was introduced, a coordinated effort should be made by all the States in unison to streamline and bring about uniformity in their legislations to ensure seamless movement of goods throughout the country.

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