Our Correspondent

Madurai, March 11

THE Tamil Nadu Chamber of Commerce and Industry has urged the State Government to positively introduce value-added tax (VAT) in the State from April 1 and in line with the Kerala model. Kerala, Andhra Pradesh, Karnataka and Pondicherry Governments have already confirmed the implementation of VAT as scheduled in their respective States.

Under the circumstances, if the Tamil Nadu Government lagged behind, it would only render trade and industry in the State uncompetitive rate-wise and adversely affect their growth.

Further, the unemployment problem in Tamil Nadu would also be aggravated, it pointed out.

The Chamber President, Mr S. Rethinavelu, in a statement here, said that in tune with the enhancement of VAT threshold limit to Rs 10 lakh by the Kerala Government, the Empowered Committee of State Finance Ministers on VAT has given States the option to revise the upward threshold limit.

In Tamil Nadu, traders having an annual turnover between Rs 3 lakh and Rs 10 lakh are exempted from the levy of 1 per cent resale tax.

As such small traders are reluctant for the switchover since under VAT, traders with an annual turnover between Rs 5 lakh and Rs 10 lakh may have to pay compounding tax at 1 per cent.

Now with the exemption limit under VAT raised to Rs 10 lakh turnover, there would not any resistance from them. Thus small traders will be enthused by the introduction of the new tax system in the State, he said.

Further, the Empowered Committee has also recommended that the 1 per cent compounding tax for Rs 50 lakh turnover limit should be made applicable only for the taxable turnover and not for the tax exempted turnover.

In view of the above concessions,a much simplified, transparent and benefits enriched VAT system should be implemented without any hesitation in Tamil Nadu from April 1, he said.

Apart from the prescribed exempted category and 1 per cent special rate, only two other rates of 4 per cent and 12-½ per cent exist under VAT.

There is a likelihood of certain products not specified in any of the VAT schedules, which now enjoy sales tax exemption in the State, will attract 12-½ per cent tax under VAT as residuary items.

This anomaly can be set right by adopting the solution adopted by the Kerala Government, which has decided to implement VAT only for 550 items mentioned in the VAT schedules and to continue the existing Kerala General Sales Tax Act for the remaining items.

The rates of these commodities can be gradually modified and brought under the VAT system in due course.

This dual tax system can be adopted in Tamil Nadu also to overcome the hurdles in the transition stage, he suggested.

(This article was published in the Business Line print edition dated March 12, 2005)
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