The Hindu Business Line : GST is better than VAT system, say experts

Former Rajya Sabha member, Mr Yelamanchili Sivaji, replying to a question at Budget Talk organised by The Hindu Business Line in Vijayawada on Monday. The Trade and Commerce Committee Chairman, Mr Nitin K. Parekh, the Vijayawada Income Tax Commissioner, Mr Aswini Kumar Behera, the Nagarjuna University Vice-Chancellor, Prof. L. Venugopala Redd,y and Mr C. Murali Krishna of Brahmayya & Co, are also seen. - V. Raju

Vijayawada , March 8

A WELL-KNOWN expert on Value Added Tax (VAT) has expressed serious apprehensions on its positive impact, stating that fundamentals have been heavily sacrificed.

The State-level VAT is going to add to price rise. The reasons are that State Governments have not worked out any mechanism to check the anticipated price rise. Also, consumers have never been consulted by the VAT panels, said Mr Nitin K. Parekh, Co-Chairman, Expert Committee on Indirect Taxes, ASSOCHAM.

Participating in a panel discussion titled `Budget Talk,' organised by The Hindu Business Line, here on Monday, Mr Parekh said though the VAT regime is expected to take off from April 1, for 10 long years, since 1994 State Government's have been wasting money.

Business does not wait, especially if Governments act so slowly, Mr Parekh said and favoured the general sales tax (GST) regime, especially in the challenging times ahead. On the overall Budget 2005-06, he said, "It was a fine balancing act driven by political compulsions."

Initiating the discussion, the Vice-Chancellor of the Acharya Nagarjuna University, Guntur, Prof L. Venugopal Reddy said as per the proposals, capital intensive manufacturers will get affected, so do the builders, who would in turn push up the prices of residential apartments. The proposal to have a pension regulator will spur growth in the insurance sector.

Referring to outlays, he felt Andhra Pradesh could be a gainer. The State is expected to get about Rs 4,750 crore under the Rajiv Gandhi drinking water project. Similarly, under the Urban Renewal Fund, Hyderabad City could get Rs 5,500 crore. He expressed surprise that Mr Chidambaram had not set any target for disinvestment.

Dr Yelamanchili Sivaji, former Rajya Sabha member said the employment growth rate in rural areas was negative and the FM has not addressed it in the Budget. He said 57 per cent of people survive on agriculture, whose percentage share of the Gross Domestic Product (GDP) is coming down. It's ironic that every 21 paisa per rupee has to be shared by 57 people, as per the allocations shown in the Budget.

Criticising successive budgets for giving `lip sympathy' or making allocations, which could not be utilised, he said the capital formation on agriculture was coming down. While there is no new model of tractor or innovation in the bullock cart, 70 new models of cars are on the roads, Dr Sivaji observed.

The Commissioner, Income Tax (Vijayawada), Mr Aswini Kumar Behera, felt that, after 1997, the present Budget offers the biggest benefit to individual tax payers, through rationalisation measures. The FM has set a target of collecting Rs 1,76,000 crore through direct taxes during 2005-06, against Rs 1,33,929 crore collected last fiscal.

Referring to the Banking Cash Transaction Tax (BCTT), Mr Behera said it would be implemented from June 1, 2005. As per a survey, from the existing 67,271 bank branches, around 13 lakh cash transactions of above Rs 10,000 were taking place every day. However, there is no trail where the money is going. This measure will bring in plastic money and check black money, he felt.

Mr C. Murali Krishna, Chartered Accountant from Brahmayya & Co dwelt on the Fringe benefit tax and Sensex. He expressed concern that the tax now identified to impact on 17 kinds of expenses is not an equitable generalisation. After the entry of multinational companies (MNCs), there has been an apparent loss of revenue. However, for the Government to say across the board that every company has to pay is not very rational.

The main sponsor for the well attended event was the Central Bank of India, while Ilapuram Hotels co-sponsored. Earlier, Mr Saye Sekhar, Chief of Bureau of The Hindu, Vijayawada introduced the panellists while Mr Krishna Kiran, Regional Manager, welcomed.

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