The Hindu Business Line : States urged to lower rate for VAT composition scheme

VAT-implementing States have been persuaded by the VAT panel to factor in the interests of small dealers and keep the tax rate for the composition scheme as minimum as possible, a senior VAT panel official has said.

"We have, at a recent meeting, requested States to take a look at their tax rate for composition scheme and see if they could be lowered," Mr Ramesh Chandra, Member Secretary, VAT Panel, said.

Under the VAT regime, small dealers with annual gross turnover not exceeding Rs 50 lakh can opt for the composition scheme by paying a small percentage of the turnover as tax and are spared the requirement of maintaining detailed records necessary for VAT. However, such dealers are not entitled to get input-tax credit.

Trade bodies including the Confederation of All India Traders (CAIT) have been making a case for a uniform 0.25 per cent tax rate under the composition scheme. A large number of VAT-implementing States have currently pegged the tax rate under this scheme at 1 per cent.

Trade representatives claimed that many small dealers hesitated to opt for the composition scheme in those States where the tax rate was pegged at 1 per cent.

No VAT on job work: Job work activities would not be subjected to State-level value added tax (VAT) as such transactions are not in the nature of a sale, the VAT panel has said. This clarification has come as a major relief for the trade and industry, which was looking up to the State Governments to explain the position on applicability of VAT on such arrangements.

"There is no question of levy of VAT on job work. This is because job work is not a sale. There is also no need to notify that such transactions are exempt from VAT," Mr Ramesh Chandra, Member-Secretary of the VAT panel, said.

Trade representatives were insisting that the States spell out their position on job work transactions through executive orders so as to remove all possible doubts on this issue.

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