VAT depts likely to get computerised in three years

With all states, barring Uttar Pradesh and Tamil Nadu, implementing the value-added tax regime, the central government has turned its attention to computerisation of the VAT departments of states.

Tax consultants Ernst & Young, along with the Hyderabad-based National Institute of Smart Governance, have been mandated by the finance ministry to prepare a model VAT administration framework.

The two agencies have begun with pilot projects in four states "" Delhi, Andhra Pradesh, Gujarat and West Bengal. According to J Satyanarayan, CEO of NISG, the objective of the exercise is to formulate a common model for simplified VAT administration.

"The idea is to simplify the existing procedures for registration, accounting and audit of traders across all the states," he said.

The report of the pilot project is to be submitted by October while the computerisation of the VAT departments in all states is expected to be completed within the next three years.

The empowered committee of state finance ministers on VAT is also working with the revenue department to develop a single harmonised system of nomenclature (HSN) code for all the products under VAT across the country.

A single HSN code has become essential for the operationalisation of the Tax Information network (TINXYS) by states, which seeks to capture details of the inter-state transactions online.

"TINXYS will be effective only if all the states use the same HSN codes for the VAT items. Until now not a single state has developed the HSN codes despite nearly 16 months of implementation of the new regime. The revenue department is now assisting the empowered committee to ensure that the HSN codes are similar to the codes used by excise and customs," Ramesh Chandra, advisor to the empowered committee on VAT, told Business Standard.

Meanwhile, Delhi government has finalised a list of 20-25 items such as wood, dry fruits, ghee and pulses on which it wants the empowered committee to lower the VAT rates.

"Delhi has reduced the duties on these items from the mandated 12.5 per cent to 4 per cent. We want the committee to reduce the VAT rates for these products since these are items of general consumption," A K Walia, Delhi finance minister, said.

The committee is expected to take a view on the deviations from the VAT rates at the next meeting on August 19 in Kerala.