The Hindu Business Line : VAT next? TN businessmen keep fingers crossed

IT is the suspense and uncertainty that is the hard part. Is Value Added Tax (VAT) going to happen, ask traders in Tamil Nadu as a large number of States prepare to switch over to the new tax regime from tomorrow.

In Tamil Nadu, manufacturers and traders have reconciled themselves to VAT not happening for now and businesses having to continue with the general sales tax regime.

But at least the States that are not for the change are in a minority. With more than 20 States opting for VAT there will be a greater degree of uniformity than under the sales tax regime, say manufacturers and traders as they look forward to the shift.

However, it is not as if the situation is comfortable even in the States that are expected to implement VAT. There is very little communication between the authorities and businessmen. The Government officials are not informative as they are yet to come to grips with the new system, they say.

Even the registration process has not started in some States, worries continue about the status of transition stocks, and there is no clarity on Central Sales Tax issues. So, traders have preferred to not hold stock during the last few days and have put off purchases by about a week.

But these are teething troubles that can be sorted out. The bottom line is that the manufacturers in those States that are to shift are at least better off than those in States that are not for the change, they say.

Take Tamil Nadu, which has decided against the shift for now. Manufacturers and traders in the State will be at a disadvantage as compared to neighbouring States that shift over to VAT, they say.

The business community is a disappointed lot. No amount of demand from industry and trade associations has helped to change the Government's mind. Though the organised sector, small scale industries and trade bodies have unanimously pushed for VAT, it is only a section of the trade, which is exempt from the purview of VAT, that is against the shift, they point out.

At a recent workshop on VAT, leading manufacturers underscored the importance of the shift to VAT. It was imperative that all State governments implement VAT uniformly and simultaneously. Particularly in the South where diversion of trade to neighbouring States is easy, any delay on Tamil Nadu's part will be a setback with neighbouring States ready to implement VAT.

They had discounted concerns of a drop in revenue with implementation of VAT. There is no fixed rule that tax revenues would drop with introduction of VAT. In some cases, taxes would drop and in others increase.

But now that with VAT not likely they are resigned to what is in store. What of it? Manufactured goods may be a little costlier here. Prices of commodities such as edible oil will be higher here than in Andhra Pradesh or Karnataka. So? The show will go on, says the business community.

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