SOME IMPLICATIONS OF VAT IMPLEMENTATION


  
1. REPORT OF KELKAR COMMITTEE NOT TO BE CONSIDERED: The empowered committee on Value added tax (VAT) has decided not to consider the latest report of Kelkar committee. Explaining the reason for such an action Ramesh Chandra, secretary, empowered committee on state finance ministers on VAT said that a lot of views generated in the report were digressive in nature and would only divert the group away from the basic issue.

2. TOBACCO INDUSTRY: Mr. Chandra also clarified that there has been no proposal to keep the tobacco industry out of the VAT regime. The rate will be kept at 4% with leverage to the state governments to impose luxury tax leading to effective tax rate of 20-25%.

3. OCTROI: It was also clarified on the issue of octroi, that it could continue provided the state governments agreed to remove the same.

4. VAT RULES: Mr. Chandra expects the rules of VAT to be ready by November end. In this regard, all states have been directed to modify their laws accordingly. A massive campaign in this regard would be started beginning November this year to bring out awareness among traders, consumers, manufacturers, administrators and other stakeholders.

5. ENTRY TAX: Also, once Vat is implemented, all barriers to transfer of goods between states would be abolished. The entry tax would be abolished while the check posts may remain for a while to check evasion of tax.

6. NO SURCHARGE: It was also made clear that there will be no special addition tax in addition to VAT or in other words no surcharge or tax in any form would be levied.

7. CLASSIFICATION OF GOODS AND SERVICES : The classification of goods and services should be logical and uniform in all states and based on national priorities, which promote national development.