The Hindu : VAT to be introduced in April

Online edition of India's National Newspaper
Sunday, Dec 29, 2002

Southern States

Southern States - Karnataka

VAT to be introduced in April

By Our Staff Correspondent

TUMKUR DEC. 28. The Additional Commissioner of Commercial Taxes, Balaji Singh, has said that the State Government will introduce the Value-Added Tax system (VAT) on April 1.

Presenting the VAT Law (Karnataka Model) to 1,000 traders at the Tumkur District Chamber of Commerce and Industry office here on Saturday, Mr. Singh said the Government proposed to peg the upper limit of tax, under the model, at 25 per cent while in other States it was as high as 50 to 60 per cent. The Government proposed to provide rebate for purchases made during the previous year (April 2002 to April 2003), while only three months rebate was offered in other States.

He said only 60,000 to 75,000 traders in the State with an annual turnover above Rs. 15 lakh would become VAT dealers and would have to file monthly returns. Two lakh other traders would be covered under the Composition Scheme, and they would file returns once in three months. Flat rate of taxes would be applicable to them. All hoteliers and contractors would be brought under the scheme.

Mr. Singh said: "The returns are taken as final. We accept returns in the form of floppy (computerised accounts) also. There is no need to file annual returns. No hassles of assessments and reassessments. Hardly any trader will be called to the office. No visits, no checks, and no verification of stocks. Only in cases of reasonable doubts, clarifications will be sought. To avoid vindictive action by officials, the decision to verify stocks will be taken by one official, and it will be done by another official."

He said: "Local VAT offices will be set up in districts and sub-offices in taluks. But registration certificates with photos of traders will be issued against application by a centralised network. Those in the recognised sector (income tax payers, Central Excise account holders, etc.) will get registration certificates automatically. Every trader with Rs. 15,000 turnover a month must register."

"The model has 90 sections in eight chapters formulated by an international consultant, Brown Company. It is clear and lucid to achieve simplicity in process and transparency in implementation. Traders will have no initial discomfort in changing over to the VAT. Many rules (appeals, revisions, etc.) will be the same as they are. Heavy penalties are prescribed for defaults, wilful violations, and evasions. Officers will have no discretion to alter them," he said.

Mr. Singh said India accounted for only 0.73 per cent of the world exports. With VAT introduced in all States, export would grow.

The State's tax revenue was expected to increase. Uniformity of taxation in all States would be achieved. Many developing countries had introduced the VAT system.

Lauding the media for playing an important role in the process of changing the taxation into VAT, Mr. Singh said it took the lead in Canada.

"It is known as Clean Launch of VAT there. We anticipate the media in the State to popularise the VAT among the traders and the people, and make them familiar with the new business process," he added.

The President of the Tumkur District Chamber of Commerce and Industry, N.R. Jagadheesh, said the Andhra Pradesh Government had taken steps to create awareness on the VAT system. The State Government was lagging behind in this regard.

Traders had many doubts about the new system and were worried over the change over in three months from now, he added.

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