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Trade bodies back VAT

By Our Special Correspondent

JAIPUR, MARCH 31. The trade bodies have cautioned Rajasthan against the adverse impact of not implementing VAT (Value Added Tax), along with other States from April 1. The implementation would have made the trade and industry more competitive and also have helped the Government to increase its revenue, they have pointed out.

"The implementation of VAT can result in a win-win situation for the industry and the Government," observed the Rajasthan State Council of Confederation of Indian Industry (CII). Rajasthan was likely to suffer for the non-implementation of VAT as sales of goods as well as business in general would shift to the States like Delhi, Haryana and Punjab, CII maintained.

Rajasthan's inherent advantages in terms of availability of minerals, trained manpower in diamond and jewelry, textiles and building stone sectors and its proximity to Delhi would not hold good any more once it failed to implement VAT, CII pointed out.

"Adoption of VAT is a must to make Indian industry competitive both at the domestic and global level. The countries in other parts of the globe have dismantled their borders and barriers to make the whole region a common market. Unfortunately within India we have created fiscal barriers in the form of 35 different States which are as many different markets," the PHD Chamber of Commerce and Industry (PHDCCI), noted.

"VAT is a new system and an evolving legislation. In the beginning we may face a few problems. During the transition period all the stakeholdrs should have a positive approach to implement VAT in a mission mode. The States which have said no to VAT should come forward to implement it to make India a common market," K.N. Memani, president of PHDCCI said.

"The implementation VAT will be a step in the right direction. Phasing out of the CST is a matter of time as it has been observed by the Empowered Committee of the State Finance Ministers," noted R.K.Poddar, chairman, CII, Rajasthan State Council. "Buyers would prefer neighbouring States where VAT is in prevalence as it is going to be fewer rates of taxes there," he pointed out.

The trade bodies warned that in the case of goods purchased or manufactured in Rajasthan there could be an increase in stock/branch transfers to other States as VAT paid in any other State is eligible for credit. This would result in a possible decline in revenue collection in Rajasthan.

The investment also would suffer as with the "existing procedural impediments" in Rajasthan investors would prefer VAT States. "Rajasthan with a number of taxes will not be able to project itself as an investment friendly destination. Non- availability of VAT credit on purchases made within the State would be another key factor which would work as a deterrent to fresh investments," said Mr. Poddar.

In the event of non-implementation/late implementation of VAT the State would lose the compensation offered by the Centre. At present the States which are introducing VAT have been promised 100 per cent compensation of their losses in revenue in the first year, 75 per cent in the second year and 50 per cent in the third year.

CII said that implementation VAT was a step towards integration of sales tax with the service tax and ultimately, the Central Excise. The States' demand for powers to levy service tax on some services would not be realized till all the States operated under VAT regime, it said.

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