Chelliah Moots Steps For VAT Implementation

Chennai, November 22: | Updated: Nov 23 2002, 05:30am hrs
It is time to stop debate on the advantages and disadvantages of the Value Added Tax (VAT) system. The time is up for its introduction as India needs a common market. Without an internal free trade system we cannot have free trade area for ASEAN or other regions, says Dr. Raja Chelliah, chairman of the Madras School of Economics and architect of Indian tax reforms.

For the introduction of VAT, he said, the country has to take a few introductory steps. They are, the application of information technology, widespread computerisation, bringing all registered dealers into tax net, avoiding exemptions, granting rebate on tax already paid and phasing out of central sales tax.

Dr Chelliah said VAT should cover all registered dealers who should file returns and pay tax. In order to bring taxpayers to a managable fold, the thershold limit of taxation should be raised. Quoting Tamil Nadu example of Rs 3 lakh, he said the limit could be Rs 5 lakh. This hike will reduce the number of taxpayers by 40 per cent. The revenue involved is only one per cent, he said.

Addressing a regional conference on VAT 2002: Streamlining Challenges to Implementation, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), Dr Chelliah said, along with these steps there should be a few additional ones for the implementation of VAT. The first move should be to remove all exemptions. Now in Tamil Nadu there are 64 classes of goods under exemption.