Also, the flexibility given to states in certain matters will lead to disparities among various state VAT laws, which would go against the basic fundamentals of this tax.
These views were expressed by the Confederation of All India Traders (CAIT), in reaction to the White Paper released by the government on Monday.
It said that an attempt had been made to establish that the proposed law will be beneficial in comparison to the existing Sales Tax Act but the contents of White Paper tell a different story.
According to a CAIT press release, a statement in the White Paper that the existing sales tax structure was fraught with double taxation and multiplicity of taxes was factually incorrect since there was no provision of levy of turnover tax, surcharge on sales tax or additional surcharge under the present Sales Tax Act in a number of states.
The body proposes to discuss at length the paper on Wednesday-Thursday when trade leaders from all over the country will meet in New Delhi.
Another fundamental of VAT missing in White Paper, it says, is that even after its introduction many other types of taxes will continue along with central sales tax. The trade body is in favour of abolition of central sales tax on introduction of VAT.
The release says that the procedure for carry-over of excess credit is lengthy and will result in huge amount of traders capital lying idle with the department.
It says the composition scheme as stated in the White Paper has no rationale since dealers opting for it will not be eligible for VAT.
There is also no need for another VAT audit when traders are already subject to one audit under income tax.
Petrol and diesel have been kept out of VAT but are subject to sales tax or some other state tax, which is another irritant provision of VAT.
The White Paper does not carry the list of 46 items kept under exempted category and 270 commodities kept under 4% list.
This leads to the inference that states might be given liberty in deciding such commodities, which will again reflect disparity in tax structure between states.
The levy of major items under 12.5% tax slab against current 8% will lead to price inflation.