Capital adds value to Centre's tax plan

VAT's THE ISSUE: DELHI

With Delhi going ahead with implementation of VAT and neighbouring states like Uttar Pradesh, Rajasthan, Madhya Pradesh and Chhattisgarh continuing with the sales tax regime, inter-state trade is expected to get a major setback.

While Delhi traders along with the opposition BJP have demanded deferring of VAT in the state as it would lead to price rise, state government officials said traders in non-VAT states would suffer more than their counterparts in Delhi.

"A state like Rajasthan, which purchases most of the capital goods from outside, would be at the receiving end as it cannot claim any input tax credit," said Delhi sales tax commissioner R K Verma.

In such a situation, prices of goods will vary across states as different rates are applicable under the sales tax regime and VAT. Cost of production would also be different with some states continuing with exemptions under sales tax.

With non-VAT states like Uttar Pradesh and Rajasthan continuing with the exemption schemes under the sales tax laws, the cost of goods in such states would be cheaper than in Delhi.

While traders in Delhi will be able to claim input tax credit, there would be no such provision in states like Rajasthan and Uttar Pradesh.

Delhi Finance Minister A K Walia said on Monday there would not be any rethink over the decision to implement VAT in its present form.

Amidst a walkout by the BJP legislators, the Delhi VAT (Amendment) Bill, 2005 was passed in the Assembly.

The amendment contains provisions like increasing the threshold from Rs 25 lakh to Rs 50 lakh, tax deduction at source at 2 per cent for work contracts, no separate audit for VAT for dealers with turnover of over Rs 40 lakh, automatic VAT registration for a dealer registered under sales tax etc.

The Delhi sales tax department, readying for the new tax regime, has undertaken measures like training programmes for traders to allay fears about VAT. The department had kicked off its advertising campaign even before the empowered committee's ad campaigns, with a budget of Rs 2.5 crore.

Extensive training programmes for the sales tax officers, including specialised training for operations like audit, enforcement and process refunds have been conducted by the department.

The state government has spent Rs 4 crore for upgrading software systems in the sales tax department. A large front office with 80 counters is being constructed at the sales tax office to facilitate transactions.

The sales tax department also plans to offer online filing of returns, providing arrear details through SMS. Also, in a move to decentralise tax payer services, the department plans to set up branch offices and kiosks that would accept tax receipts and challans.