Economists Blame It On Procedural Problems

New Delhi, March 27: | Updated: Mar 28 2003, 05:30am hrs
Economists have found both conceptual and procedural problems with the implementation of value added tax (VAT) regime in Delhi from April 1. There is problem with the design of the tax. According to noted economist, Amaresh Bagchi, the Delhi government should have incorporated the destination principle which basically means that the tax should be levied on final consumption and be appropriated by the state of destination.

Commenting on the opposition to the introduction of VAT, Mahesh Purohit NIPFP economist, pointed out that one of the major reasons for opposition to VAT in Delhi is the proposal to collect entry tax from transporters. This has led to a perception of burden among dealers.

Besides, the government should have adopted a floor rate mechanism of about 8 per cent to begin with. "The rate of 12.5 per cent is high and therefore the fear of high incidence on commodities is fueling the opposition," says Dr Purohit.