Phdcci calls on Centre to phase out central sales tax

New Delhi, April 28 | Updated: Apr 29 2006, 05:30am hrs
The PHD Chamber of Commerce and Industry (Phdcci) has asked the Centre to phase out the central sales tax (CST) as it is not compatible with the value added tax (Vat).

According to Phdcci president Sushma Berlia, CST distorts the concept of Vat and the state governments should impress upon the Centre to do away with CST. Our estimate is that if inter-state barriers are removed and the north Indian common economy is strengthened, the collective state domestic product will increase by 1.5-2%, Ms Berlia said.

She further said that the objective of Vat is to make India a common market. This can be achieved only if the rates, classification, documentation and procedures are uniform in all the states, she said. All states and union territories should follow the white paper and guidelines issued by the empowered committee of state finance ministers in its letter and spirit, she added. Highlighting the variation in Vat, she said food-based beverages attract 12.5% Vat in Haryana whereas in Delhi and Uttaranchal it is 4%. Similarly, in case of food processing items most states levy a Vat of 4% except Himachal Pradesh, Andhra Pradesh, Bihar, Arunachal Pradesh, Manipur, Sikkim, Nagaland and Tripura where Vat is 12.5%. The differential Vat rates distort the system and may encourage arbitrage, Ms Berlia said.

To discuss various issues under Vat, the Phdcci has called a summit of chief secretaries of northern states on April 29. She said that smooth movement of goods would happen when there are no check posts and barriers. Check posts work against the concept of Vat and also increase the transaction cost. According to Phdcci, states should not levy entry tax and octroi over and above Vat. There is a dire need for borderless, seamless northern India, Phdcci president said.