Maharashtra offers rate subsidy

The value-added tax (VAT) regime in Maharashtra offers a unique subsidised tax rate of 8 per cent for thousands of retailers in the state, 4.5 per cent lower than the base rate of 12.5 per cent.

Confirming this, a senior official told Business Standard: "Retailers in Maharashtra have been offered a composition scheme, under which they are only required to file six monthly returns. In addition, their VAT rate has been fixed at 8 per cent of their gross profit."

Simply put, a retailer who has a sales turnover of, say, Rs 3 lakh annually, and a purchase turnover of Rs 2 lakh has only to pay a tax of 8 per cent on the differential, Rs 1 lakh ""his gross profit.

Maharashtra's scheme compares well with schemes in Andhra Pradesh, Tamil Nadu and Karnataka where retailers are taxed at a rate of 1 per cent of their annual turnover.

Most retail outlets in the state have not joined in the anti-VAT protests, the official pointed out.

"Most retail outlets are proprietory concerns, run on a father-son basis. Instead of asking these retailers to work out the VAT rate on individual commodities (some may be 12.5 per cent while others may be 4 per cent), we have allowed for an average flat rate of 8 per cent for retailers," the official said.

The fact that most retail outlets in Mumbai city and other parts of the state have not participated in the general shutdown announced by traders protesting against VAT is an indication of their concurrence with the VAT regime, the official points out.