The Hindu Business Line : Chidambaram allays fears of traders on VAT — To hold series of meetings to deal with genuine difficulties

THE Union Finance Minister, Mr P. Chidambaram, intends to soon hold a series of meetings with members of the trading community in different parts of the country to allay their apprehensions over the implementation of value-added tax (VAT) regime from April 1 next year.

Addressing members of the Parliamentary Consultative Committee attached to the Finance Ministry, Mr Chidambaram noted that some sections of the trading community have expressed reservations and said that he is ready to deal with their genuine difficulties.

The Finance Minister said that there is both political as well as economic consensus to reform the tax system in the country. Stating that there has been "very good progress," Mr Chidambaram held that all the States would be ready to adopt the VAT regime from April next.

An official release quoted him as saying that 27 States have already got their legislation ready and the remaining are expected to do so by next month.

Mr Chidambaram also called upon the members of the Parliamentary Consultative Committee to make all efforts to educate the traders as well as common public about the advantage of introducing VAT.

Multi-media campaign: A major multi-media campaign, including in regional languages, would soon be launched to inform and educate the public (including the trading community) about the advantages of VAT system, he said.

Responding to members' queries, the Finance Minister clarified that VAT will remove Inspector Raj as the proposed system relies on self-policing and self-assessment.

He also said that a White Paper is ready and a standing committee, which includes representatives of traders, is also looking into different aspects.

The Finance Minister also said that the White Paper would soon be published and copies made available in regional languages also.

Explaining the technical details about the administration and implementation of VAT system, Mr Chidambaram said that most of the traders, mainly in the rural areas, would not fall under the ambit of VAT, as the threshold limit of turnover is Rs 5 lakh. Moreover, traders with turnover up to Rs 40 lakh will have the facility of compounding, which would minimise the need for their detailed account keeping, he added.

The Finance Minister said that the rapid adoption of VAT system by countries around the world is probably the most important tax development of the twentieth century.

He said that VAT today is a key source of government revenue in over 125 countries that have adopted the system. When it has proved good and beneficial for these countries, it cannot be bad for India, he added.

The Finance Minister said that with the introduction of VAT all over the country and its stabilisation over a period of the next few years, a transparent, simple and modern commodity tax system will develop in the Indian federation, which will be advantageous to industry, trade, consumers and the State/UT governments.

He also informed the committee that the Government has deferred the decision on the abolition of Central Sales Tax by one year.

Further, Mr Chidambaram said that the Union Government has been playing a facilitative role in the process of introduction of VAT and remains fully committed to provide all possible support for introduction of VAT in all States/Union Territories with effect from April 1, 2005.