VAT assessees to get one-year relief

State to amend Value Added Sales Tax Act on the lines of Empowered Committee's suggestions

The assessees for value added tax (VAT) are going to get a one-year transition relief of no fresh taxation on the goods purchased, unsold or have incurred local tax during the current financial year.

The move, as advised by the Empowered Committee, is intended to avoid double taxation, as the unsold stocks will otherwise be subjected to tax under the new multiple tax regime that comes into force from April 1, 2005.

The state government is planning to amend the state Value Added Sales Tax Act on the lines of the changes suggested by the Empowered Committee, in the brief winter session of the state Assembly, which is tentatively scheduled to commence in the first week of December 2004.

"If the Assembly will not be able to take care of the bill for want of time, the government will promulgate an ordinance," a government official told Business Standard. According to sources, the name of the Act itself is expected to change to 'Andhra Pradesh Value Added Tax Act-2005' from the present 'Value Added Sales Act'.

Earlier, the state government was willing to give a 3-4 month reprieve on the unsold goods, but finally heeded to the Empowered Committee's latest suggestion on a full year relief. "Though this measure is prone to misuse with false claims of purchases and sellings by some businessmen, still the risk is worth taking," T Vivek, joint commissioner of the state commercial taxes department observed.

According to the estimates of the state's commercial taxes department, about one lakh out of the total four lakh dealers in the state will come under the VAT net. This one lakh figure includes the voluntary VAT assessees. The new threshold limit determined for the VAT assessees will also be incorporated into the new bill.

Though only those businessmen whose annual business turnover is above Rs 40 lakh mark will come under the new tax regime, those registered under Central Sales Tax and also those who import goods from outside the state will also become compulsory VAT assessees, irrespective of the size of their business volumes.

The threshold limit for the bottom line or the completely exempted category of businessmen has been increased to Rs 5 lakh annual turnover from the Rs 3 lakh annual turnover proposed earlier.

Likewise, the turnover of the middle tier, who will have to pay only one per cent turnover tax but with an option to come under VAT, has been increased to Rs 40 lakh from Rs 30 lakh as proposed earlier.

About 1.25 lakh assessees who come under this category will be benefited from the new norms, as they are expected to submit only quarterly returns along with quarterly payments without undergoing the cumbersome accounting procedures.

The new bill also includes other important amendments such as bringing drugs and medicines into the four per cent tax category from the 12.5 per cent category.

Meanwhile, textiles, sugar and tobacco products will not be included in VAT initially. Apart from the items currently exempted under the APGST Act, items like poultry feed, aqua feed, animal feed, fire wood, unbranded bread and organic manure are being exempted for the first time in VAT. Ten items like murmaralu, atukulu, banana leaves, bamboo matting, bangles bade of shell, plastic, glass are also being generally being exempted.