The Hindu Business Line : TN Govt plans to introduce VAT Bill in current session

Policy note
Manufacturers and traders will have to contend with three rates of taxes at 1 per cent, 4 per cent and 12.5 per cent.
Gold, silver and jewellery will be taxed at 1 per cent.
The rate of tax on industrial inputs will be 4 per cent.

Chennai , Aug. 7

The Tamil Nadu Government will introduce a VAT Bill during the current session of the Assembly paving way for shifting over to value added tax from January 1.

Tax incentives such as deferrals, exemptions and waivers granted to industries will continue under the VAT till the end of the incentive period.

According to the policy note on commercial taxes for 2006-07, under the VAT, manufacturers and traders will have to contend with three rates of taxes at 1 per cent, 4 per cent and 12.5 per cent against the seven slabs in vogue now - 1, 4, 10, 12, 12.5, 16 and 20 per cent - apart from the 3 per cent on inputs at concessional rates, surcharge of 5 per cent and additional sales tax and resale tax of 1 per cent.

Under the VAT regime, gold, silver and jewellery will be taxed at 1 per cent, goods and commodities of basic necessities such as medicine and drugs, all agricultural and industrial inputs, capital goods and declared goods will be taxed at 4 per cent and other items at 12.5 per cent.

Taxable goods

Also under the VAT, additional sales tax, surcharge and resale tax will be abolished. But compounding tax will continue for works contract, hotels and restaurants. All goods including declared goods are covered under the VAT. But petrol, diesel, aviation turbine fuel, Indian made foreign liquor and sugarcane will be taxed at different rates.

Small dealers with annual gross turnover not exceeding Rs 50 lakh will have the option to pay tax at the rate not exceeding 1 per cent as compounding rate.

Dealers opting for compounding tax will not be eligible for input tax credit.

The rate of tax on industrial inputs will be 4 per cent under the VAT with the facility of deducting input tax paid against the tax payable on finished product.

Traders will have the facility to deduct tax paid on purchases against tax payable on the sale of goods.

Input tax credit will be given for traders also for purchase of goods meant for resale.

Exporters to get refund

Exporters will get a full refund of State tax within three months of export. Units in special economic zones will be eligible for refund of input tax paid.

Entry tax is to continue. But tax entry paid on inputs from other States will be eligible for tax credit.

Tax paid on goods held as closing stock, out of purchases made one year prior to the date of introduction of the VAT, will be eligible for tax credit.

During 2006-07, the Registration Department has reported Rs 959.26-crore revenue up to July 2006. Its earning during 2005-06 was Rs 2,348.64 crore.

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