In a representation to the finance minister, Assocham has cautioned that any piecemeal and faulty implementation of the sales tax rationalisation by states or categorisation of products will cause unnecessary hardships to trade and consumer.

An enhanced sales tax rate may push up prices of many essential commodities and inputs and thus make the scheme self-defeating in its present form, Assocham president Shekhar Bajaj said. The chamber felt that the entire tax scheme should be based on scientific and sound rationale. "The commodity classification for levying the tax should be rationalised." It felt that the commodities should be reclassified and commodities of which are of mass consumption should attract zero or low duty.

"Uniformity of sales tax rates should be coupled with corresponding changes in central sales tax," Bajaj said, adding that there had been a drastic cut in the number of commodities exempted by the states.

Citing instances, he said, in Gujarat, 25 commodities are now exempted as compared to 136 previously and 111 items now attract eight per cent sales tax under the new scheme which would "adversely affect many small and tiny sector units which may face the survival problem".

On the classification of products, the Assocham president said the sales tax structure of each state should follow the same product code as will be followed by the Union government for classification of excise and custom duty. The products should be codified uniformly either based on harmonised system of nomenclature (HSN) or international tariff convention (ITC)," he said. The chamber recommended that even if the same tax rate was applied to more than one product of HSN, the classification of products should not be altered from the excise or custom tariff in order to facilitate value-added tax in future.