NEW DELHI: VAT was to come into effect across the country Tuesday, the beginning of the new financial year. But at the eleventh hour, a committee of state finance ministers chaired by West Bengal Finance Minister Asim Dasgupta announced that a final decision on VAT implementation would be taken at a meeting on April 8. Two earlier deadlines were missed in April 2001 and 2002 because of states' reluctance to accept a uniform tax structure in place of the variable and multiple taxes charged on products and services. The federal finance ministry is keen to implement VAT, which is in force in about 110 countries, to have a more accountable system and allow for free movement of trade unhindered by steep taxes in some states on the one hand and unbalanced development, on the other, due to low taxes in others. With the centre assuring the state governments that any loss in revenue would be fully compensated in the first year of implementation, a large number of states agreed to implement the new tax structure from Tuesday. But some like the Delhi and Rajasthan governments decided against implementation so as not to annoy traders, who observed strikes and protests thrice in March. Both Delhi and Rajasthan will elect new assemblies towards the end of this year. A two-day nationwide protest shutdown by traders began Monday. "The first day of the strike was very successful with over 5,000 trade organisations joining hands to protest the introduction of VAT," said Praveen Khandelwal, general secretary of the Confederation of All India Traders. "We are continuing with the strike for the second day (Tuesday) as there is as yet no firm announcement of a deferment for at least one year," Khandelwal told IANS. The apex traders' group has asked the finance ministry to defer VAT by another year on the ground that its implementation would not only create hassles for the trading community but also add to the cost of products. "Assessment of trade under the existing sales tax (ST) and the new VAT is not feasible technically and logically. Till such time as the existing ST legislation is not repealed, VAT implementation should be deferred. In addition, most state governments are not ready with infrastructure for implementation. We are making a request to the apex committee of the finance ministry to defer VAT for another year," said Khandelwal. The centre has deferred a decision on implementation till April 8 as the state governments still have to get presidential approval for their VAT legislation. Only five states -- Andhra Pradesh, Gujarat, West Bengal, Maharashtra and Karnataka -- have sent their bills for presidential assent so far. Others like Kerala and Tamil Nadu have sought time to take another look at their bills and smooth over some glitches. It seems VAT implementation will take more time as fears are being expressed in industry and among trade groups that unless all the issues are ironed out, not only business but also the consumers would have to bear the brunt.
Source: IANS