Traders report card gives thumbs down to Vat

New Delhi, Jan 4 | Updated: Jan 5 2006, 05:30am hrs
Criticising the value added tax (Vat) regime, the Confederation of All India Traders (CAIT) has said that the tax structure has become more complicated after the implementation of Vat. In a report card released by the body on Wednesday, CAIT secretary-general Praveen Khandelwal said under the new regime, the goods have been defined loosely. The government has still not come out with the final rate of taxes.

The report card is a review of Vat regimes performance since its implementation in April, 2005.

The report card said the there is still no clarity on industrial input, capital goods or the rate of tax on life saving drugs. The final list of tax-free items and items with 4% rate of tax is still awaited, said Mr Khandelwal.

The empowered committee on Vat had said that with the introduction of Vat other taxes would be abolished. However, CAIT has said that only turnover tax and surcharge, which are part of sales tax, have been abolished. Even on the central sales tax, which was to be phased out, the government is yet to draw a roadmap, the report card said.

It also said that contrary to the empowered committees comment that prices in general would fall post-Vat implementation, nothing of the sort has happened.

A composition scheme with payment of tax at a small percentage of gross turnover was also committed in the white paper on Vat. However, the trade body said the composition scheme is not uniform in all states.

Citing the example of Maharashtra, it said the payment of tax in composition scheme is not linked to gross turnover.

Under the exempted category, there will be about 46 commodities, the committee had said. On this, the report card said the list of exempted category differs from state to state.

The traders also complained that a two-way interaction between the government and the trade and industry as well as the common public was promised in the committees white paper. However, CAIT said only the empowered committee is issuing statements and the state governments are implementing the law. Therefore, there is only one way enforcement of law on the dealers and the common publics input is missing.