Chamber advises caution on VAT in UP

The PHD Chamber of Commerce and Industry (PHDCCI) wants a careful implementation of value-added tax, to be introduced from January 1 in Uttar Pradesh.

In a representation to the UP government, the chamber has warned against a hasty introduction, which may lead to serious burden on industry.

A major concern highlighted by the chamber is how the current trade tax exemptions enjoyed by industrial units in the state will be treated in the new regime.

The chamber has pointed out that many manufacturing units were established in the state on the basis of the trade tax exemptions offered under various industrial policies of the state government.

According to the chamber, under the VAT system, these exemptions are proposed to be changed to deferment, which means the units will pay the government tax after a certain period.

This will result in a serious financial burden on manufacturing units, especially those that have made huge investments on the basis of exemptions.

The second issue is the proposed high VAT rate on furnace oil. The draft VAT Act proposes 20 per cent on furnace oil with no portion being "vatable". In contrast, most other states have allowed the whole burden of VAT above the rate of central sales tax to be "vatable".

According to the chamber, since furnace oil is used in large quantities, both as fuel as well as for the generation of electricity, the high rate of VAT will be counterproductive. Hence the rate of VAT over and above the rate of CST should be "vatable".