Ashok Mitra slams VAT plan

Asok Mitra, the former finance minister of West Bengal and Left politician, today slammed the proposed introduction of value added tax (VAT) and threatened to move the courts if the central government went ahead with VAT on April 1, 2005.

VAT was being implemented by the central government under a committee which had the present finance minister of West Bengal, Asim Dasgupta, as its chairman.

"We want the government to delay the process and form a Commission in the mean time that will take opinions from different segment of the industry and population following which it should frame a system that would be beneficial for all concerned," explained Mitra at a press conference in Kolkata today while putting forward his views on the negatives of VAT if implemented.

Asked if he had conveyed his views to his party, the CPIM, Mitra said, "I have not heard a single Left party member airing any positive sentiment about the new tax structure."

According to Mitra, VAT would snatch away revenue from the state government which used tax collections for local development.

VAT would lead to deny state governments funds for local development, Mitra insisted.

"The right to impose sales tax has been granted to the states under Article 246 of the Constitution. Neither the Centre nor the state government has the power to abolish this right without amending the Constitution. The initiative of the Union government to do away with sales tax is therefore illegal and unconstitutional," he said.

Mitra pointed out that no state government could enact legislation on VAT since such a tax was not included in the state list of the Seventh Schedule.

The Centre could use the residual powers granted to do so.

If the Centre amended laws to legalise VAT, the basic structure of the Constitution could be threatened and this could be challenged before the Supreme Court, as in the Kesavanand Bharati case which went against the enactment.

"There would be other practical problems, like inability of the state government to extend incentives to new industrial units or use tax rebates to encourage small industry," he said.

"The Centre will be free to increase excise duties on different commodities at will and this could mean inflation," he added.