The Federation of Andhra Pradesh Chambers of Commerce and Industry (FAPCCI) has asked the Government not to go for a hike in the standard VAT (value added tax) rate to five per cent from four per cent. The Chambers felt that this would have a direct impact on food grain prices.

“Poor people spend over 70 per cent of their income on food alone. The persistent high food prices, much higher than the general inflation, have eroded the purchasing power of the public across all income classes. Any increase in tax rates would further burden them,” Mr Nitin K Parekh, Chairman of Tax and Commerce Committee of FAPCCI, said.

Referring to reports of government’s plan to increase the tax rate, the Chambers asked the Government not to take any hasty decision in this regard. It reminded the Government’s decision to increase the 12.5 per cent slab to 14.5 per cent during Sankranti festival 2010. It also pointed out at the imposition of VAT on textiles and sugars without giving much time in July, 2011.

Keeping in view the record growth rate of 30 per cent in tax revenues during 2010-11, the industry was expecting some radical steps such as restoration of Input Tax Credit (ITC) on certain industrial inputs withdrawn earlier and exempting all food grains from levy of VAT on par with all the other States.

“Businesses are already reeling under the impact of continuing inflation and liquidity crunch. We strongly believe that any change in the standard rate of VAT at this juncture will severely impair businesses. In fact, many reforms like taxation of works contracts are pending for years for disposal,” he said.

In a letter to Mr Ashutosh Mishra, Principal Secretary (Revenue, Govt of AP), he said it was not fair to impose more and more taxes on the sincere and law-abiding dealers. The Government could increase tax receipts by improving efficiencies, plug leakages and bring in uniformity and equity in taxation.

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