Value added tax regime has not proved superior to sales tax system in tackling tax avoidance so far as inter-state and intra-state movement of goods are concerned, says a survey.
"This (inability of VAT system to control tax avoidance) has emboldened the tax avoiding section of traders and goods booking transporters to go for movement of retail cargo on inter-state and intrastate routes with impunity as prevailed during the sales tax regime," a study by Indian Foundation of Transport Research and Training said.
The survey said during March 2005, an element of uncertainty and confusion in the markets resulted in 40 per cent drop in retail parcel booking on intrastate and interstate routes in most parts of the country.
Consequently, the retail freight rates and truck freightage took a nosedive ranging from 7 to 8 per cent.
Unlike sales tax regime, the fear among traders and transporters happened to be that the cargo movement in VAT regime may come under mass scrutiny at inter-state borders and major trading centres.
However, the trading community and goods booking transporters seem to have heaved a sigh of relief in last 6-8 weeks as various states have taken a slack view of the parcel cargo movement between them.
The facilitation service provided by goods booking transport companies has helped the tax avoiding section to hike retail freight rates by 10-15 per cent in last 6-8 weeks.
