Salty relief and peppered angst

VAT'S THE ISSUE: Gujarat & Kerala

VAT may not keep its date with Gujarat, but there is confusion aplenty. Being a BJP-ruled state, the government will not implement the value-added tax from April 1, but the traders have not been spared the uncertainty on the issue.

Nobody is a position to decide whether the much-debated tax will benefit the manufacturers and traders or not. But that does not deter the Gujarat Vyapaari Hitarakshak Samiti (GVHS).

The traders' association has said it will continue to press for its demands of modifications in VAT, as sooner or later, the tax regime will be implemented in the state.

Officially speaking, that seems a likely supposition. The state government has completed the necessary groundwork. The Gujarat Value Added Tax (Amendment) Bill, 2005 was tabled in the ongoing Budget session of the assembly.

Most chambers of commerce and industry organisations in the state are of the opinion that shifting to the VAT regime will bring in uniformity, but a clear picture will only emerge once the tax is implemented.

The salt industry in Gujarat""the largest in the country""however, is in no doubt. It is delighted that Gujarat has decided against the new tax regime.

The salt industry has been the most vociferous in the anti-VAT camp for the past few months. It had threatened that it would stop loading salt onto trains from April 1.

Salt has never been taxed in independent India and it would have attracted a 4 per cent VAT if the BJP had not backtracked.

The smaller salt units will be the worst hit. And they form the large chunk of the 5,000 odd units that dot the coastline. Medium and large units add up to about 10 to 15 per cent.

The small units manufacture, pack and even sell salt from one location. Their scale of production is so small that records and paperwork are an anomaly. In fact, many are not even registered with the government, trade associations say.

Another Gujarat city not too happy with VAT was Surat. Its prolific zari (silver embroidery) industry had been worried when it did not figure in the list of 56 items exempt from VAT.

However, the state government has clarified that it is a handicraft industry and so will be exempt. "Zari has been exempted from VAT and this has come as a relief for the industry," said Ramanbhai Jariwala, a leading zari businessman in Surat.

GVHS President Jayu Tanna said though his organisation welcomed the non-implementation of VAT, it will continue to pursue its demands of increase in the taxable limit.

"We want the minimum taxable limit to go up from Rs 50 lakh to Rs 75 lakh and the lump sum tax to be reduced to 0.5 per cent. This will leave two-thirds of the retail traders out of the VAT net, but it is only fair," he said.

VAT should be opposed for two reasons, according to Tanna. First, under the sales tax regime 90 items were exempt, while only 54 items are VAT-free.

And secondly, in future the tax ambit is bound to be stretched. "Tobacco, sugar and cloth have been kept out, but once excise on these goods goes, they will come under VAT," he fears.

Gujarat Chamber of Commerce and Industry (GCCI) President Chinubhai Shah, however, is not hitting the panic button. "A huge confusion is presently prevailing and this does not help anybody," he said. True, even the non-implementation of VAT has not helped sort out the issue.

Kerala

April 1 is destined to be a red-letter day for traders in Kerala. While the state government is adamant on implementing VAT, the traders in the state are equally firm in their opposition.

The fraternity of 10,000 plus wholesale traders has already stopped giving fresh orders and the state may face acute shortage of essential commodities in April. Kerala being a consumer state, the impact of VAT, and the agitation it has provoked, is likely to be severe.

The Kerala Vyapari Vyvasyi Ekopana Samithi (KVVES) has warned it will continue protests until all the anti-trade clauses of the new Kerala Government Sales Tax (KGST) Act are withdrawn.

But the state government is keen on implementing VAT. State Finance Minister Vakkam Purushothman has said the issues would be discussed only after implementation. Despite urgings from the Opposition parties, the government has refused to talk to the traders.

Interestingly, all the major industry associations, like CII, are by and large in favour of VAT. Even they, however, have reservations about the new Act.