Post-mortem of VAT in July

The Centre and states will do a key evaluation of the value added tax (VAT) experience after the first three months of VAT implementation, i.e. in early July, said Ramesh Chandra, member secretary of the empowered committee of state finance ministers.

Speaking at the Bangalore Chamber of Industry and Commerce's (BCIC) interactive session on VAT here on Thursday, Ramesh Chandra said a secretary-level meet of VAT states will be held in June.

It will be only to iron out the procedural hurdles presently faced by the implementing states.

"But the full impact assessment of VAT will be done only in July as April revenues are not indicative for VAT," he added.

Small traders and ignorant traders are still out there in large numbers. "The state governments have been asked to take steps to bring them on to the VAT platform through persuasion and imparting education on the benefits of VAT," he said.

The empowered committee of state finance ministers also plans to study and track inter-state transactions. This study is to be taken up for 21 states on a pilot basis for seven months.

"After this pilot study, inter-state transactions on a countrywide basis will be taken up for study one and a half years from now," he explained.

With the federal character of our country, it will take about one year for VAT to stabilise. "Countries like Canada took a similar time before stabilisation. Brazil, which is also implementing VAT, is still working and solving problems. As compared to these countries, India has been facing very few problems," he said.

Ramesh Chandra declared that the empowered committee of state finance ministers will not endorse any software for VAT adoption by states. It is left to the wisdom of the concerned states to look after its interests.

A uniform tax rate among the states for industrial and capital inputs cost "" whether it should be 4 per cent or 12.5 per cent "" is being worked out.

"Every day the committee gets numerous complaints and suggestions. All this will be sorted out at the ministerial-level meet in July." The ministerial-level meet has already sorted out the rates for 66 items, he pointed out.

G K Pillai, chief commissioner of central excise, Bangalore said that VAT is working well and the deplorable fall in tax revenue of states can be reversed only with VAT. It can definitely raise the tax ratio from the current 13 per cent to a decent level of 20 per cent or even more.

Any further delay in introducing VAT by delinquent states can cause irreparable damage to the national economy, he added.