The Hindu Business Line : India Inc seeks roadmap to phase out central sales tax

INDIA Inc has said that the introduction of the Value-Added Tax (VAT) regime must be accompanied by an announcement of a road map for phasing out of Central Sales Tax (CST).

While welcoming the Government's commitment to introduce a VAT regime from April this year, Mr K.N. Memani, President, PHDCCI, has said, "Introduction of VAT must be accompanied by announcement of a road map for phasing out of CST at the earliest, as VAT and CST are incompatible."

According to him, this would improve the competitiveness of domestic industry both at domestic and international levels as well as help in bringing about the unification of the Indian market.

Commenting on the three-slab VAT structure as suggested in the white paper on the proposed tax regime, Mr Memani said that 12.5 per cent VAT is on the higher side.

This, along with the element of excise duty and other local levies, would mean a total tax incidence of over 30 per cent, which may continue to adversely affect the Indian industry.

The endeavour should be to bring it down to maximum 8 per cent and subsequently integrate it with Cenvat. The Union Finance Minister, Mr P. Chidambaram on Monday released the white paper on VAT.

Keeping petrol, diesel, liquor and lottery tickets outside the purview of VAT would mean that the States would continue to levy tax on these items at higher rate. To offset such a scenario, an upper cap should be agreed to by the states at the earliest.

Mr Sunil Kant Munjal, President, Confederation of Indian Industry (CII), hoped that with the implementation of the VAT regime would hopefully see a decline in prices of commodities.

According to the Federation of Indian Chambers of Commerce and Industry (FICCI), "VAT will end unhealthy competition and integrate domestic market."

FICCI, however, felt that while units located in SEZs and EOUs will be granted either exemption from payment of input tax or refund of the input tax paid within three months, it would have been desirable if the Empowered Committee had made the provision immediately applicable for availing of credit on inputs procured from other states through inter-State sale and stock transfer.

The Assocham President, Mr Mahendra K. Sanghi, hailed the proposal, which says that the VAT imposition will be 1 per cent on bullion and 4 per cent on foodgrains with States being given the option to exempt foodgrains in the first year.

In a statement, Mr. Sanghi also welcomed the proposal for having two slabs of 4 per cent and 12.5 per cent in the VAT regime. The proposal exempting 46 commodities, comprising natural and unprocessed products in the unorganised sector from the purview of VAT was also a welcome move.

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