VAT implementation may raise prices by 40%, fear traders

New Delhi, Jan 20 | Updated: Jan 21 2005, 05:30am hrs
Traders have rejected the White Paper on value added tax (VAT) describing it as an attempt to introduce a fractured VAT into the country from April 1 next. They also expressed the fear that imposition of VAT, as envisaged by the Empowered Committee, might push up prices of consumer goods by 40% at retail level.

After a two-day meeting in the Capital, the Confederation of All India Traders has decided to present a 12-point memorandum on the White Paper to the Empowered Committee.

The Committee, spearheading the movement for implementation of uniform VAT by states, has circulated a White Paper among the stake holders with a view to eliciting their views and also to build a consensus on implementation of the VAT from April 1.

Talking to newsmen, general-secretary of the confederation Praveen Khandelwal questioned the claims of the committee that goods would become cheaper in the aftermath of imposition of new taxation system.

On the contrary, he asserted, the new taxation structure might see the prices of consumer goods spiralling by almost 40%.

He explained that under the current dispensation tax on most of the goods is levied at first point of sale, thereafter no tax is charged.

After the imposition of VAT, tax will be charged at various levels on the value-added component, which will also include transport charge and profit margins of wholesalers and retailers. Although there will be set off at various stages, but the total component on which the tax will be charged will more than double pushing up the price of goods at retail level, he said.

Secondly, he said, the Central Sales Tax (CST) will continue for the time being. This will also push up the prices of various items which currently do not fall within the preview of CST.

Most importantly, Mr Khandelwal said, the committees proposal to impose maximum rate of 12.5% VAT on residual items will see prices of many goods, which currently attract 4% sales tax or are exempted, soar.

The White Paper, it may be recalled, proposes to impose two rates 4% and 12.5%. Initially, VAT system will cover 550 goods, identified by the committee.

Meanwhile, the Confederation has decided to observe all India bandh on February 1 to protest against imposition of service tax on transport of goods for trade.

Mr Khandelwal said a national action committee will coordinate the agitation against imposition of service tax.