The Associated Chambers of Commerce & Industry has told the finance ministry in its pre-Budget memorandum that states must restructure their taxes on commodities and services in such a way that not only sales tax is converted into a state VAT, but all other taxes like luxury tax, entertainment tax, passengers and goods tax and entry tax are also integrated with the VAT.
It has suggested that an implementation committee should be formed with representatives of all the stakeholders and the implementation of VAT should be closely monitored by the government.
Another important issue, as per Assocham, is the creation of awareness regarding VAT among various stakeholders. This should be carried through various national and state-level training institutes.
There should be uniform rate of taxation for individual commodities across the country. The central sales tax should be phased out, along with the introduction of the VAT, to make India a common market.
Assocham added that when goods and services are exported out of the state, the tax so collected should be zero-rated.
Wherever input taxes are paid, including that on the opening stocks, they should be fully refunded or be given tax credit thereof, the industry association said.
It has also said that according to existing Cenvat credit rules, though 100 per cent Cenvat is allowed on the input at the time of receipt, 50 per cent Cenvat credit is only allowed on the capital goods in the year of the receipt, and the manufacturer has to wait till the next financial year to avail the remaining 50 per cent.
"Trade and industry fail to understand the logic behind this discrimination," Assocham's pre-Budget memorandum says.
While welcoming the government's decision to introduce VAT by April 2005, Assocham said that a nationwide VAT implementation will go a long way in enhancing the industry's competitiveness.
