News APP

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  gplay

Home  » Business » VAT makes it, amid protests

VAT makes it, amid protests

By BS Economy Bureau in New Delhi
April 01, 2005 08:38 IST
Get Rediff News in your Inbox:

The country is set to usher in a nationwide value-added tax on Friday in place of the local sales tax amid a three-day nationwide protest by traders.

At least 19 states will implement the new system from April 1 while Mizoram and Meghalaya are expected to join up in the first week of April due to procedural delays.

"The VAT is on. We want all states to welcome the VAT," Ramesh Chandra, member secretary of the empowered committee of state finance ministers on the VAT, told Business Standard.

Don't miss:
What is VAT all about
The Crisis Over VAT

"Most officials are busy implementing the VAT in their states. A meeting of the committee could be convened after 2-3 weeks," Chandra said.

The trade bandh against the tax evoked partial response in most states on the second day, with some wholesale markets and most retail shops doing brisk business.

Reports reaching from various centres said the bandh had some impact only in Uttar Pradesh, Kerala and Jammu & Kashmir.

From Friday, the sales tax exemption forms such as ST1 (exemption for last-point goods), ST 35 (exemption for first-point goods) and ST 49 (exemption for exports) will be done away with. Traders will instead have to pay tax at every stage of value addition and claim credit for tax paid in the VAT implementing states.

For instance, if an input costing Rs 100 with a VAT of Rs 50 is, after value addition, sold for Rs 200 with a VAT of Rs 75, the tax liability of the trader to the government will be the input VAT minus the output VAT -- Rs 75-Rs 50 = Rs 25.

According to a tax official in the Delhi government, the only change in the new regime will be that the assessment forms or return forms will have additional columns requiring traders to give details about the tax paid on goods and the credit due to them.

The returns have to be filed monthly for big traders and once in three months in case of small dealers.

Rajan D Gupta, head of indirect tax practice at Khaitan & Co, pointed out that traders would have to maintain an input tax credit register along with details of their invoices.

Those with opening stocks on April 1, will, according to the state-specific VAT rules, be required to furnish physical details of their stocks to obtain VAT credit for taxes paid.

"In the case of states like Delhi, Punjab, Andhra Pradesh, Kerala, Karnataka and Punjab there is also a requirement of a certificate from a chartered accountant for opening stocks," Gupta said.

Traders will have to quote their new VAT registration numbers in their assessment forms. According to Rajan, the margins of the dealers and distributors under VAT would also have to be re-worked as prior to VAT, the margins used to be determined taking into account the cost of purchase and sales tax. Under VAT, because of accounting issues, the margins will have to be set excluding the amount paid as VAT.

While the Centre has set aside Rs 5,000 crore (Rs 50 billion) for 2005-06 to compensate states for any revenue losses arising due to VAT, Ramesh Chandra said the compensation would not be applicable for states like those in the Northeast, which did not have a sales tax regime.

"For these state governments VAT is a win-win situation. They will now get revenue thanks to VAT. There will no compensation as they did not get any revenue earlier from sales tax," he added.

Eight states, including five BJP ruled ones, are not implementing VAT. While Uttar Pradesh is not implementing it on account of resistance from traders, states like Rajasthan and Madhya Pradesh said absence of a road-map for phasing out central sales tax was need prior to VAT.

Uttranchal on the other hand is not going ahead on account of non-implementation by neighbouring states like UP. Committee officials however admit that the reasons for non-implementation are political.

Stiffer emission norms take effect

Starting Friday, 12 cities in India will upgrade to Bharat Stage-III emission norms.  Automobile manufacturers will be able to sell only BS-III compliant vehicles in the National Capital Region, Chennai, Mumbai, Kolkata, Ahmedabad, Bangalore, Hyderabad, Secunderabad, Kanpur, Pune, Agra and Surat.

In 2000, vehicles were upgraded to Euro-I equivalent norms.  Euro II equivalent Bharat Stage II norms came to force from 2001. The high pollution levels in 4 metro cities were addressed by making sulphur content in petrol and diesel to 0.05 per cent since 2000-2001. The benzene content has been further reduced to one per cent in Delhi and Mumbai.

Under the BS-III guidelines sulphur content has been further cut down to 0.035 per cent.

Most of the leading manufacturers of passenger cars have already announced their plans for BS-III rollouts.  All BS-III complaint vehicles carry a higher price tag starting from Rs 3000 unit at lower end vehicles.

Duty shackles off 217 IT goods

From Friday, the import of 217 items covered by the Information Technology Agreement will become duty-free. The government has already initiated steps to comply with the provisions of ITA-I, which is part of the commitments made to the World Trade Organisation.

In the Budget, Finance Minister P Chidambaram removed the Customs duty on certain capital goods and on all inputs required for manufacturing the 217 items.

To protect the domestic industry a countervailing duty of 4 per cent on all imports to compensate for the State level taxes on the corresponding domestic goods.  IT software has, however, been exempted from the proposed CVD.

Get Rediff News in your Inbox:
BS Economy Bureau in New Delhi
Source: source
 

Moneywiz Live!