Poll issue: Keeping VAT at bay

Tamil Nadu Traders' Association is putting up 21 independent candidates.

To stop the Tamil Nadu government from switching over to value-added tax (VAT), the Tamil Nadu Traders' Association (TNTA) is fielding 21 independent candidates in the state elections.

"Our aim is not to win but to propagate that the VAT is anti-small trader and pro-multinational," says TNTA President T Vellayan.

Tamil Nadu and Uttar Pradesh are the only two states in the country that have not yet adopted the VAT.

The TNTA has a strength of around 6,000 traders associations across the state with at least 100 members in each association. It is this muscle that the TNTA is getting ready to flex.

Officials in the finance department said the apprehensions of the TNTA were not misplaced. "Tamil Nadu has the highest percentage of tax revenue to the gross state domestic product at about 10.5 per cent. While this means good collections, it also means raising revenue through more tax is impossible. In this scenario, the VAT becomes essential," an official said.

Political compulsions had driven the state into opposing the VAT, he added. For one thing, it was being pushed by the central government, which an AIADMK government in the state had no choice but to oppose.

Second, in an election year no party wanted to alienate the powerful Chettiar, Nadar and Muslim traders, who make up the TNTA membership.

But the state government has begun to realise that opposition to the VAT was futile.

"In the last Assembly session in December, the government had a draft VAT Bill ready, but it faced such fierce opposition that the government was forced to duck, and slipped out of it on the grounds that a political consensus was needed," a finance department official said.

This was also a signal to Vellayan and others that the VAT was inevitable and on its way. "The government and the Opposition issued confusing and misleading statements on the VAT, which convinced us it was coming right after the elections," said Pugazhenda Thangaraja, a TNTA member.