UP industry demands imposition of VAT

Says non-imposition of the value added tax has been causing them harm

The industry in Uttar Pradesh is in favour of value-added tax (VAT), which is a self-regulatory system that could dismantle the tyranny of inspectors.

The Indian Industries Association (IIA), the body of the state's businessmen, as well as the Confederation of Indian Industry (CII) are openly supporting VAT and saying that not implementing it has been causing them harm.

"The UP industry wants VAT. But the government says that VAT will be implemented only if traders too demand it, even though the sections most affected by it are industry and consumers," said D S Verma, executive director, IIA, Lucknow.

Uttar Pradesh is one of the few states to have shunned VAT even as the rest of the country has embraced it. IIA and CII have also been trying to hold discussions with traders to evolve a consensus on the issue.

CII has been organising training sessions on VAT which have not met with much success because traders have not been willing to participate.

The government seems to think that VAT is not necessary since even without it the revenue collection grew at a robust 26-27 per cent in the last financial year. However, Verma says the growth rate could have been higher with VAT.

The state's industry is willing to accept VAT primarily because it is self-regulatory and reduces harassment by tax authorities. VAT in India serves as a value-added sales tax.

It has a two-tier structure with rates of 4 per cent and 12.5 per cent as against the sales tax system of 4 per cent, 8 per cent and 12 per cent. Under VAT, most commodities that were under the 8 per cent slab will come under the 4 per cent category.

According to CII, the number of registered traders in the state will increase from 5 lakh to 25 lakh if VAT was adopted.

Small traders, however, are not known to keep proper records of their transactions and may find it hard to accept VAT.

The Uttar Pradesh government is demanding the introduction of another slab between 4 per cent and 12.5 per cent before adopting VAT. This will be for items that are now in the 6-7 per cent bracket of sales tax.