VAT: Karnataka considering relief to small traders

Karnataka government, to give relief to small traders who are finding practical problems in implementing VAT, is contemplating granting powers to the sales tax commissioner to identify and select traders handling numerous commodities to be brought under a special scheme based on sales volume and turnover.

The scheme, being drafted, might empower the commissioner to levy a percentage of the actual VAT.

VAT roll out in Karnataka has been smooth so far barring a few teething problems and the state through various its means is spreading information on the guidelines on taxation for goods and services.

Karnataka's VAT clearly has two slabs "" 4 per cent and 12.5 per cent. Small traders and small scale industries who do not figure in the 4 per cent slab are upset they have to pay tax at 12.5 per cent.

"It is here that small traders and small scale industries are facing VAT problems," said a tax consultant.

According to the consultant, small traders and multi-commodity traders are facing problems in classification of goods in sale bills.

The semi-retail and semi-wholesale dealers handling numerous commodities are facing problems in maintaining commodity-wise accounting register.

Small traders coming under VAT also find hard to maintain or collect tax for smaller denomination of trade i.e. for purchase of 50 gms or billing for small changes, less than Rs 10.

Small scale industries who find their industrial inputs classified under 12.5 per cent tax than the 4 per cent are finding their working capital getting blocked. With no clear instruction on how to bill or collect tax of a MRP-printed product has also led to confusion.

"This is the Centre's problem to which state government has to find a solution," said Manohar, who is heading VAT Committee at FKCCI.

In addition to maintaining a register, traders who have not automated their billing systems for want of capital spend more time after closing the shop to update their registers.