The Hindu Business Line : VAT implementation well on course — `Key role for CAs in obligatory audit'

THE implementation of value-added tax (VAT) all over the country from April 1 seems to be well on course as all 29 States of the Union, barring Uttar Pradesh, are ready with their draft VAT Bills.

The UP Government's reservations on VAT implementation are being addressed at a meeting of a UP ministerial team with the Empowered Committee Chairman here on Saturday.

Talking to Business Line here on Saturday after the inaugural session of the 23rd annual seminar on `Harnessing knowledge, skills & values in the era of reforms', organised by the Accountants' Library (a recognised body of practicing CAs), Dr Asim Dasgupta, Finance Minister, Government of West Bengal and Chairman of the Empowered Committee of State Finance Ministers for VAT implementation, said apart from UP, all States were gearing up to implement VAT from April 1. He said a team of ministers from UP was in the city for detailed discussions on VAT.

Earlier, addressing the members of the Accountants Library, Dr Dasgupta said CA professionals would be asked to perform an obligatory audit of the input claims vouchers (inputs set-off claimed at first point) of registered dealers.

He said the West Bengal draft VAT Bill had this provision of obligatory audit by CAs as an integral part of taxation reforms process underway in the State.

The Minister clarified that Inspector Raj would be replaced by a self-assessment system, with built-in safeguards against misuse. There will be a simple monthly return form of deemed assessment of registered dealers, which will be subjected to a periodic audit to be cleared by a State audit team.

Each return submitted will be compared with the claims set-off voucher at the output stage. The Minister said the entire exercise has been worked out on the basis of a co-ordinated income tax-based matrix, along with Central Excise and Customs. Purchase of raw materials will be tracked through a Taxation Information Exchange across States, establishing perfect co-ordination with income tax returns, it is pointed out.

Seeking a detailed dialogue with the CAs on the proposed audit and the new data system being evolved to make VAT a success, Dr Dasgupta said the purpose of data exchange was to aim at total transparency through compilation of lively data, as mere information technology-based mechanical data would not be enough.

"We need the professional touch of CAs in this," he said to the gathering of senior CA professionals. Pointing out that VAT would be difficult to evade, he said, "We need to achieve greater transparency as against monopoly powers, if the social objectives of taxation reforms have to reach the common people."

Hinting at the apparent risk involved in self-assessment (by way of forged documents), Dr Dasgupta clarified that self-assessment will have to go hand-in-hand with obligatory auditing, wherein some 20 per cent of the dealers would be picked for such audit on a random sample basis. He said the plan was to bring all registered dealers within the ambit of a tax audit in the next five years (starting from April 1).