VAT will not lead to price rise: Panel

The empowered committee of state finance ministers on value-added tax today assured traders that the imposition of VAT would not lead to a surge in the prices of goods.

"There will be no cascading effect and traders will save on input costs that will be free of taxes. Because of this, prices are expected to come down," Asim Dasgupta, head of the empowered committee, said after the second meeting of the consultative committee set up by the committee to address the concerns of traders.

Traders feel that the increase in the rate of taxes under the VAT regime will result in a rise in prices.

Stating that this was only the second meeting of the consultative committee, Dasgupta said that all states were gradually sorting out the problems related to the implementation of VAT.

He said the empowered committee is holding consultation with the state governments on the draft white paper which would be finalised this month.

"We are trying to communicate properly the details of VAT. Once, everybody is aware of the details, there will not be any ground level. difficulty," he added.

Meanwhile, the trader associations including the Federation of All India Traders, the Confederation of All India Traders and the Bhartiya Udyog Vyapar Mandal in a joint representation to the empowered committee said that the central sales tax should be abolished and items of daily use should be exempted from sales tax.

They pointed out that the draft VAT laws being finalised by the state government contained harsh penalties which would encourage tax evasion. They also suggested that the exemption limit of Rs 5 lakh along with the threshold limit should be increased.

Earlier today, a delegation of local traders also met Parthasarthy Shome advisor to Finance Minister regarding the imposition of service tax on transportation of goods from January 1, 2005.

Traders are seeking a withdrawl of the tax on grounds that the notification is in contravention of the budget provisions and contrary to the preamble of the service tax.

The Confederation of All India Traders in a statement said they would observe tomorrow as 'Black Law day' and organise dharnas to protest against service tax.