Industry Sets Up Working Group On VAT Implementation

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New Delhi, February 6:: As many as 32 industry associations, at the initiative of the Federation of Indian Small and Micro and Medium Enterprises (FISME), have decided to form a national working group on implementation of value added tax (VAT).

The working group will closely examine drafts of VAT in different states and suggest ways to bring in uniformity in the proposed legislations drafted by various states.

Two state working groups have already been formed in Delhi and Uttar Pradesh. The associations in Punjab, Haryana, Madhya Pradesh, Mahrashtara, Tamil Nadu, Karnataka, Gujarat, Orissa and Rajasthan will soon follow the suit.

At a meeting convened here on Wednesday, the representatives from various states highlighted serious flaws in the draft legislations and said significant benefits of the new VAT regime had been nullified by inclusion of clauses.

“From the transitional issues right from sales tax to VAT regime such as tax threshold, point of taxation, definition, registration procedures, powers of tax authorities, penalties and appeals have been formulated with a colonial mindset. It would lead to chaos at the very outset and was like a 21st century concept with 16th century mindset,” president of FISME Dinesh Singhal said.

He said the industries by and large had been demanding VAT as they thought that it would make industries more competitive by reducing cascading effect of taxes, reduce cost of doing business and make India one market.

However, the proposed drafts are nowhere near to reach the objectives and would increase the inspector raj, harassment and corruption, and fragment the markets further.

The noted economist, MK Purohit, said the states had resorted to different classifications, different definitions and rates for same or similar items, impairing the most important principle of homogeneity of rates, rules and systems.

He said the states have contravened the very spirit of the legislation by proposing archaic practices such as entry tax and physical verification.