The Hindu Business Line : AP worried over poor VAT collections

WHILE most of the VAT (value-added tax) implementing States see a spurt in tax collections in excess of 15 per cent, Andhra Pradesh, which has been recording an average of 15 per cent growth in Commercial Taxes collection, recorded a growth of 3.4 per cent in the first quarter of VAT.

The anomaly has baffled not just the Empowered Committee on VAT, but also the State Government. The officials of the Commercial Taxes Department have started analysing the factors that might have led to the marginal growth rate.

One of the reasons for the poor collections could be the feeling of uncertainty with regard to applicable rate of tax, according to official sources. Instead of taking chances and ending up in a row with customers, a good number of dealers have started raising delivery challans in place of invoices. (A delivery challan comprises information about goods despatched to dealers or customers.)

Though goods are transferred from the dealer to customer, the `transaction' is not complete as only delivery challan is given. This is not going to be reflected in the turnover. The fact that 15 per cent of returns of 1.10 lakh dealers filed no returns partly indicates the problem, they said.

The increasing number of applications being filed with the Advance Ruling Authority too gives an indication of uncertainty and hesitation on the part of dealers with regard to tax collectible.

So far the authority received 200 applications seeking clarifications on tax rates. Of this, 150 got orders. As many as 30,000 applications are filed seeking credit returns (wherever input tax is more and output is less).

The shift of effective tax point from purchase to sales point is also believed to be a reason for the low growth in collections. The actual `event' (the sale) should take place for VAT accruals to be shown in the books.

The trade and commerce, however, finds the whole VAT effort in the State as `half-hearted'.

Mr Nitin Parekh, Chairman of Trade and Commerce panel in the Federation of Andhra Pradesh Chambers of Commerce and Industry (FAPCCI), feels that the reason for most VAT dealers not filing their returns could be their unwillingness to continue as VAT dealers.

The trade should be allowed to a one-month amnesty scheme allowing the traders to shift to the turnover tax bracket.

The move to new tax system should have been affected through a change in administrative mechanism. "This has not happened," he points out.

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