Chambers, traders split on VAT

As the April 1 deadline for implementation of the Value Added Tax draws closer, sharp differences between traders and the Federation of Indian Chamber of Commerce and Industry (Ficci) and the PHD Chamber of Commerce and Industry (PHDCCI) have begun to come out in the open.

After observing a nation-wide one-day bandh on February 21, traders are now threatening a 'VAT rath yatra' in different parts of the country in the first week of March to oppose imposition of the VAT.

The apex industry chambers, however, have come out in support of the VAT saying the new tax regime is good for trade and industry and should be implemented.

Ficci has termed as "unfortunate" the apprehensions of traders that introduction of the VAT will lead to inflation and complexity in complying with procedural requirements.

Supporting the government and the empowered committee of state finance ministers on the implementation of the VAT, Ficci president Onkar Singh Kanwar said the VAT was a fiscal innovation of the 21st century and 20 million people working in industry were eagerly looking forward to its introduction on the scheduled date.

PHDCCI president K N Memani also said the VAT, which had been adopted by over 130 countries, would improve the competitiveness of industry and would do away with the cascading impact of taxes.

"We have already missed the bus for the last three years and it is high time we went for the VAT," he said.

The Confederation of All India Traders(CAIT), which has played a major role in the demonstration against VAT, has termed the statements of these chambers as "highly regrettable" and said that before making such a statement, industry chambers needed to understand apprehensions of the trading community and its "logical objections" to VAT.

CAIT secretary-general Pravin Khandelwal said the fundamental principles of the VAT, that were in practice internationally, were missing in the Indian version of the tax.

He said the language of law was the same for a trader and industry, and the procedural defects and anomalies in the proposed VAT system would affect industry in a bigger way than the traders.

"VAT may be a fiscal innovation of the century but the country cannot afford to replace a 55-year-old taxation system by a hit and trial method as important questions of revenue are involved. The VAT is a taxation system which needs attention of all the concerned sectors like government, trade and industry beside others," he said.

PHDCCI said going by international experience and the limited experience in Haryana, it was clear that the VAT regime was a self-policing system with a positive impact on the price line.

It also said even if a few states were not able to implement VAT from April 1, the government should still go ahead with its implementation.