Karnataka rings in VAT

Karnataka ushered in the value added tax (VAT) regime even as a few traders agitated against its implementation.

Traders, mainly those in the wholesale commodity trade, said that they were not opposed to the new taxation system. They were only miffed over the lack of preparedness on the part of tax officials and dissemination of methods and procedures were hurdles.

Earlier in the day, deputy chief minister and finance minister Siddaramaiah launched the VAT system in the state saying Karnataka is committed to tax reforms and is going ahead in implementing the new system.

"Some states are not implementing VAT for political reasons," Siddaramaiah said and added that the common man is free to draw his inference.

Asserting that Karnataka was bold in adopting the reforms path, Siddaramaiah said that in 2004-05, state tax revenue growth was 27 per cent. With this growth, it should have been more hesitant as it was working the old system well.

State estimates that it may incur a loss in revenues upward of Rs 2,000 crore due to VAT this fiscal. But he was confident that Union finance ministry will make good the loss in the first year of its implementation.

Siddaramaiah said that he was confident that on seeing the benefit of the new tax system, states which have not come forward will join it by next fiscal. To safeguard the state's interests against Tamil Nadu not opting for VAT, Karnataka has imposed special entry tax for goods coming into the state.

On the occasion a special CD containing 2.8 lakh VAT tax information number (TIN) was also released. "The state government was willing to talk to any trade body to sort out any misgivings," he said and added that the government was willing to go all out to help the honest tax payers.

The government also plans to be lenient for four months for any technical violations or erroneous filing.

Earlier in the day, Raja J Chellaiah chairman, of the Madras School of Economics and chief architect of tax reforms in the country speaking on the occasion said that VAT will make country competitive in the global trade.

"India can be globally competitive as a fully-integrated market if all the states adopt the VAT regime," he said and added that if states adopt VAT and at the Centre some duties are rationalised then it gives the country the chance to be more competitive.

The country, by going in for the VAT regime, has emphasised that India was not just competing with developed matured markets, but with emerging economies like Latin America and China.

"We should take advantage of our new tax regime to gain a foothold in the ASEAN countries," he added.

Confusion at APMC

Confusion prevailed in the APMC yard on Friday as state government announced goods and tax rates coming under VAT Act.

According to Ramesh Chandra Lahoti, president of Bangalore Wholesale Foodgrains and Pulses Traders Assocation, the traders came to know of the tax rates and goods coming under VAT system only on Friday morning through an advertisement.

Traders are for VAT system but are disillusioned over the state government services in giving out information on VAT roll out and procedures and methods to be followed, said Lahoti.

About 50 per cent of the goods come under the zero per cent tax and the balance vary from 4-12.5 per cent tax burden. Traders are confused over the goods which do not figure in today's announcement, Lahoti pointed out.