National information network for VAT

Kolkata, Dec 23 | Updated: Dec 24 2004, 05:30am hrs
The government will set up a country-wide information network with a view to smoothen collections under the proposed value added tax (VAT) regime, according to Parthasarathy Shome, advisor to the finance ministry. To start with, a pilot project will be launched in the north-east states.

This should help sufficient expansion of taxpayers base, said Dr Shome, who anticipates that with the improvement in account maintenance in all levels under the proposed tax regime, the revenue loss should not be much.

It is, however, widely believed that the state governments, which are saddled with large fiscal deficit and debt burdens, would lose a critical resource-raising avenue under the VAT regime. VAT is proposed to be implemented from April 2005.

Dr Shome was in Kolkata to interact with the industry representatives at the India Chamber of Commerce.

Dr Shome underscored the need to draw convergence parameters among states to implement VAT successfully. In a sense as the Cenvat rule is alrady in place VAT has already been implemented at the Centre. Now it is time for the states to implement this, he said.There are instances of state-level VAT in Brazil, Canada and countries under EU, Dr Shome said. About 130 countries have implemented VAT, according to him.

While Asim Dasgupta, the finance minister of West Bengal, and many Leftist economists feel that VAT would destroy the federal structure of the country.

Proponents say that VAT would help eliminate multiple taxation and promote competitiveness of exports.