`An assessee-friendly system'

CHENNAI March 30. ``Value-Added Tax is neither a new tax nor a new kind of tax, as is often made out by many. It is the same as the present sales tax (including resale tax), with only the method of calculation of tax liability being changed''. With this opening remark and with a simple ``mantra'' (``tax paid on purchases to be deducted from tax payable on sales''), which he kept repeating till the very end of his two-hour-long interactive presentation at a workshop here yesterday, the chief of the Tamil Nadu VAT Cell and Deputy Commissioner, G. Shanmugam, assured a large gathering of representatives of trade and industry that the VAT regime would only be more assessee-friendly, with a lot of bureaucratic ``Forms'' eliminated and with higher transparency and reduced scope for corruption and harassment. Of course, till the CST (central sales tax) was abolished, certain ``forms'' would remain.

At the workshop organised by the Hindustan Chamber of Commerce and the Rotary Club of Adyar, Mr. Shanmugam, however, made it clear to those who would be covered by the State-level VAT (viz, excluding those who can opt out of the system by paying a compounded tax or those who pay taxes not included in VAT) that the ``invoice'' would be the most important document from the side of the assessees and they should take care to preserve them. ``The invoice is nothing but currency''.

The chamber president, G. Narayanaswamy, and the chairman of the chamber's expert committee on sales tax and VAT, Mahaveer Munoth, earlier deplored a campaign being carried on even at the ministerial level in the State that VAT would lead to high prices and huge loss of tax revenue.

``If prices increase as a result of higher tax burden, how can VAT be called a burden on the exchequer, at least in the medium and long-term'', was the substance of their contention. Whether opposition to VAT is a result of the ``fear of the unknown'' as some speaker surmised, or was motivated to thwart a system which would discourage, if not eliminate, the culture of ``bill trading'' (transactions under false or fictitious invoices), selling without billing and similar malpractices, as some others suspected, Mr. Shanmugam's presentation, organised just a couple of days ahead of a Statewide trade bandh call, included a lot of clarifications which set at rest many doubts and fears of tax professionals and trade representatives present. He also indicated that one provision (Cl-18, sub-cl 8) in the draft VAT bill of Tamil Nadu, restricting purchase tax credit to the level of tax paid on sales when the latter was lower, was an unintended negative feature and might not find a place in the final bill.

While explaining how VAT, universally adopted, was intended to reduce the cascading effect of tax on taxes and margin on tax cost of inputs on prices and at the same time enlarge the resource mobilisation base of governments, Mr. Shanmugam said procedural provisions in the VAT legislations of some other States and Union Territories, which sought to confer some relief by deviating from the consensus reached by the Empowered Committee of State Finance Ministers, were bound to be withdrawn in future. Otherwise, those States would face Plan outlay cuts by the Centre, and that was the reason why the Tamil Nadu draft bill stuck to the terms of an all-India consensus.

He asked traders to wait and see how ``the new method of calculating tax liability'' (viz, VAT system), once it came into force, would motivate them to insist on obtaining proper invoices while making purchases and to issue proper invoices while selling.

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