Date:06/12/2004 URL: http://www.thehindubusinessline.com/2004/12/06/stories/2004120601611300.htm

Back Kerala small-scale sector voices anxiety over VAT provisions

V. Sajeev Kumar

Kochi , Dec. 5

THE Kerala State Small Industries Association has urged the State Government to introduce value added tax (VAT) in Kerala only after making major amendments, as certain provisions in the Act are detrimental to the small-scale sector.

If the VAT is introduced in the State in the present form, all tax-related incentives hitherto enjoyed by the tiny and small-scale units and traders will be removed at a stretch, Mr Xavier Thomas Kondody, State President of the Association, has warned.

The various provisions in VAT Act 2003 is the replica of the Kerala General Sales Tax Act 1968, which is inimical to the small sector, he said.

He pointed out that the continuance of central sales tax at the rate of 4 per cent without a set-off provision would affect the existence of a large number of small units, which were depending other States and union territories for their raw material needs.

Along with the high revenue neutral rate of 12 per cent, the State reserves the rights for introducing additional sales tax and entry tax, which would result in price increase on products, he added.

Moreover, the introduction of a common rate of 4 per cent on a list of industrial raw materials would open up a plethora of issues and disputes between the assesses and the tax department, he added.

Small-scale units of paint, biscuit, pesticides, plant protection chemicals, bio fertilisers etc would lose all competitive edge to large industries and MNCs once their sales tax become uniform under VAT.

The assessing powers conferred on the commercial tax officers, the harsh powers to raid small-scale manufacturing and trading premises and the more investigative powers to be followed to inspect production and stock records being submitted by the units to their financing banks would definitely act as impediments for growth as free enterprises in the globalised environment, he said.

The Association, therefore, urged the Government to place the VAT Act 2003 before the select committee of the Assembly and also carry out serious interaction with industry and trade associations before its implementation.