The Hindu Business Line : VAT a tough time

The introduction of VAT is being surrounded with a lot of hype. The Central Government is facing opposition from both the State governments and the traders, and has extended the deadline indefinitely. Does this reveal the complexity of the VAT system or its irrelevance in present times?

It was in France that VAT was first introduced in 1954, with the motive of doing away with the intricate turnover tax system that prevailed then. Considered from this standpoint some issues need be raised: Is VAT going to supersede any ill-conceived and abused tax system now prevalent?

Is it expedient for the Central Government to fix deadlines alone, or should it also co-opt the States in making a combined efforts to design a uniform VAT system useful to all? Is it the `announcement effect' of VAT that is being met with such strong resistance, or is it a truly unviable option for the traders?

The need of the hour is to give an unbiased and unprejudiced report of the introduction of VAT and to hold meetings to banish the fears of the parties concerned.

G. Narasimha Raghavan

e-mail

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Your editorial, `Starting trouble' (Business Line, April 2) brings out the concern of the Centre in not implementing VAT from April 1.A few State governments are not yet ready to go the VAT way due to the political and other compulsions. Even where the governments are willing, there are differences in some of the contents. Some States are contemplating changes in the provisions. It is doubtful whether the policy could be implemented by the new cut off date, July 1.

The proposal needs more homework and discussions, even at preliminary levels. The Centre could have arranged elaborate discussions with all the States which, in turn, should have initiated talks with the trading community and called for suggestions to make whatever changes are possible.

As sales tax is entirely a State subject, it was the duty of the State governments to kick off pro-active steps to implement the scheme in its most viable fashion.

The next three months should be used by the VAT experts at the Centre and the States to negotiate with trade and industry to clear the inherent hurdles and thus pave way for a healthy and smooth implementation of the scheme.

C. P. Velayudhan Nair

Kochi

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