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Expand VAT regime: Assocham

Expand VAT regime: Assocham
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First Published: Thu, May 31 2007. 12 36 PM IST
Updated: Thu, May 31 2007. 12 36 PM IST
New Delhi: A proposal has been mooted to the Empowered Committee of all State Finance Ministers to bring under VAT regime all imported goods meant for personal consumption and not used for resale.
In a representation sent to the Chairman of the Committee, Assocham urged: “Under current VAT rules, imported goods used for personal consumption are exempt from VAT levy, making the domestic market vulnerable for overseas goods.” This leads to distortions in VAT structure which according to the Chamber can be curbed by bringing in imported goods for personal consumption under the VAT regime.
Imported goods directly consumed on import without entering local trade are not covered by State VAT or CST, whereas locally produced goods suffer State Tax.
The Chamber also pointed out that goods imported through various dealers are only subjected to VAT levy while mass imports for personal consumption escape it and create ambiguities which need to be corrected without further delay.
Introduction of uniform State GST from VAT will create uniformity in the tax structure and ensure better tax compliance. Variations in tax system do not allow creation of common market.
Presently State VAT does not cover sectors like textiles, sugar and tobacco products. These products are charged separate duty in lieu of VAT which is not vat-able. This mechanism breaks the VAT chain and consequent VAT credit is not available.
Consequently, if these indigenous products are used as inputs, the goods produced with local inputs like garments and food products will suffer competitive disadvantage in the international market. Merging non-vat-able special duties with State VAT may help.
Stability of any tax structure is essential to promote investment and maintain economic growth. After implementing GST, states should not start levying new/additional taxes. This issue needs to be addressed at the initial state in view of the recent experience of some states altering the state VAT structure within one year of its implementation.
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First Published: Thu, May 31 2007. 12 36 PM IST