The Hindu Business Line : Political consensus vital for VAT implementation, says Sinha

VALUE added tax (VAT) could not be implemented in all States as much for political reasons as economic. The UPA Government has failed to maintain lines of communication with the Opposition and could not convince traders, according to Mr Yashwant Sinha, former Finance Minister.

The lack of communication is causing him worry on the future of economic reforms, Mr Sinha said.

It is the ruling party that is to be blamed for the breakdown of dialogue as it had rebuffed the Opposition when it had volunteered its support on the Pension Bill. The Centre had chosen to move an ordinance rather than introduce a Bill with Opposition support. It is the ruling party's responsibility to evolve a consensus on important issues, he said.

Addressing a meeting organised by Madras Chamber of Commerce and Industry here on Saturday, Mr Sinha said that the switch to VAT could only be achieved through political consensus and by convincing traders. Not just BJP-ruled States, even Tamil Nadu, Uttar Pradesh and the Congress-ruled Uttaranchal had not switched over to VAT.

Neither the Finance Minister nor the Prime Minister had thought it fit to meet with the senior BJP leaders to discuss VAT-related issues. It was only when the BJP-ruled State Governments decided against implementing VAT that the Chairman of the Empowered Committee of State Finance Ministers, Mr Asim Dasgupta, had spoken to the former Prime Minister, Mr Atal Bihari Vajpayee.

The BJP-led Governments had also to bow to public opinion expressed in the form of wide support for the three-day strike by traders opposing VAT. The perception that traders oppose VAT because of income-tax implications is not entirely convincing, traders say that they cannot evade tax by themselves but that they are supplied stocks through the `secondary route' by manufacturers, he said.

Mr Sinha pointed out that the BJP Government had delayed introducing VAT in 2002 because more work was needed to convince traders and smoothly implement VAT. But there has been no work done since then. The industry should also have played a more prominent role in pushing VAT, he said.

It is no longer enough that industry spells out the policy support needed for growth. But it has to play a more active role in the political sphere to ensure that the ruling parties and the opposition work together.

Responding to a question on what happens to India if each political party indulges in such oneupmanship, Mr Sinha said, neither the NDA nor the UPA can keep India down. But we need to take care that there are not too many roadblocks.

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