People's Democracy

Bengal CPI(M) Clarifies Rationale Of VAT

B Prasant

THE Bengal unit of the CPI(M) has called upon the traders’ organisations to refrain from going in for a strike action on the implementation of Value Added Tax or VAT.  In a statement issued from the Muzaffar Ahmad Bhavan in Kolkata, Anil Biswas, state secretary of the Bengal CPI(M) has clarified the rationale behind the VAT. 

In the earlier tax regime, an entrepreneur had to pay taxes on purchase of raw materials and production implements.  There was a fresh round of taxes imposed on the finished product itself. 

VAT means that the entrepreneur shall now have to pay taxes in a much more simplified manner and once VAT is set in place, the taxation at the level of the raw materials will be dropped.  Traders will benefit well from VAT.

The traders will themselves decide the amount of VAT to be paid based on a very simplified form. The balance emerging out of how much the trader had paid as taxes, and how much he/she has gained by way of taxes when selling their wares, is the VAT. 

The trader has merely to work the amount out and deposit it with the concerned department with a filled-in form.  The trader will be required to carry a record of their cash memos. No additional books of accounts will have to be maintained over and above those already being maintained.

In general, small traders have been excluded from the VAT. Those who have annual sales figures less than Rs 5 lakh would come within the purview of the VAT.  For those having sales figures of between Rs 5 and 50 lakh, the VAT will be fixed at 0.25 per cent of the total sales.

Implementation of VAT will see taxes of essential articles become zero or be drastically reduced.  For all food articles including rice, lentils, semolina, flour, raw vegetables, fish, meat, salt, sugar, bread, seeds sweetmeats etc, there would be no VAT applicable. 

Clothing like dhotis, and saris will not be included in the VAT regime. The tax on tea will come down to four percent from eight.  The same reduction is in operation for medicines and drugs as well as paper.  Tax incidence will reduce for soap, cooking gas, cement, and fertiliser.

In a VAT regime, taxation across states will have a rational basis of uniformity in general. The points of discrepancies will be smoothed over through meetings of the committee of state finance ministers.  The committee will also work for the implementation of VAT in eight states that have not yet executed it.

The VAT will certainly militate against tax evasion and the funds that will be additionally generated from collection of taxes will be used for developmental purposes.   Anil Biswas clarified to say that neither the union government nor any other agency “has imposed VAT on the states, and the decision to implement VAT follows the resolution to this effect taken at the chief ministers’ conference held in 1999.”

The subsequent discussions were held based on the states list of the Constitution.  Discussions were also held in the empowered committee of the state finance ministers.  The committee has also met the traders’ representatives several times and have endeavoured to clarify matters and to resolve problems through discussions.

In the circumstances, the committee of finance ministers has exhorted upon the traders to withdraw the threatened strike and to resolve the outstanding issues through discussions.

 (INN)