The Hindu Business Line : `VAT slab rate might lead to evasion'

TRADE and industry circles here, while welcoming the introduction of the value added tax (VAT) from January 1, are disappointed on the VAT rates. They fear that fixation of the highest slab rate at 12.5 per cent will have a cascading effect on prices and might lead to tax evasion.

The Tamil Nadu Chamber of Commerce and Industry pointed out that goods that do not find a place in the 4-per cent list would necessarily be placed under the 12.5-per cent list, which is not fair and reasonable.

The highest slab should be fixed at 8 per cent and products not mentioned in any of the schedules should attract only a levy of 4 per cent, it said.

Further, essential commodities of daily use should be exempted completely.

A high-level advisory committee must be formed, consisting of trade representatives to sort out problems, if any and finalise the modalities, it said.

The Madurai District Tiny and Small Scale Industries Association, in its statement, sought a reconsideration of the highest slab rate of 12.5 per cent and fix the same as 8 per cent, as assured in the preliminary discussions. On the Central sales tax, it said phasing out must be within two years.

The Tamil Nadu Foodgrains Merchants Association pointed out that 250 essential commodities have been brought under the tax net. This should be reviewed and exemption must be given to `rice' and place the same under `articles of local importance'.

The association also pleaded for a highest slab rate of 8 per cent. The continuation of Central sales tax will pose additional hardship to the business community and must be done with for smooth transition, it added.