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Journalism of Courage
Come April 1, India Inc will wake up to the new tax regime of value added tax (VAT). Strangely, the government will publish the rules for VAT only on March 22 without giving much time for the lay businessmen — who will be the most affected — to understand the new regime.
Traders and small businessmen, who fear a rise in prices and cumbersome procedures after VAT introduction, are now up in arms against the proposed tax.
“The government decision to ape all that is foreign is absolutely wrong. At the outset when the system sounds strange to even the educated, how can they expect around 50 per cent of uneducated Indian population to follow VAT. Instead of simplifying sales tax they are only complicating it further,” thunders Rajendra J Thacker, secretary, Mumbai Mahanagar Vyapari Parishad.
The prices of commodities are expected to go up under VAT regime because tax will be collected at every stage of making the product. “For example, a shirt which is costing Rs 600 may be priced at Rs 900 after April 1. This is because making of a shirt undergoes about 12 to 15 stages. So we have to pay tax at each and every stage,” says Girish M Dresswalla, chairman of Girish International. It is not yet clear whether VAT will be applicable for exporters also, he adds.
Moreover, if a retailer buys a product for which VAT has not been paid by the manufacturer then the retailer will have to cough up the tax. “Does the government want us to go and investigate whether the person from whom we have bought the product has paid the tax or not?” questions Vinayak Nerurkar, member of Retailer Druggist and Chemist Association.
However, big MNCs (multi-national companies) which produce their own raw material and have direct link to the end-consumers stand to gain from VAT. “But no one is clear how much the prices will come down, or, in the first place, whether the MNCs are willing to pass on the benefits to the consumers,” traders said.
No protest is complete without a strike. To mark its opposition against VAT, Maharashtra State Chemist and Druggist Association has announced a day’s strike and has decided not to lift drugs from the wholesalers. “Apart from complicating the accounting system, we end up paying the prevailing octroi and professional tax even after thrusting VAT on us,” says Nerurkar.
Mumbai Mahanagar Vyapari Parishad is planning to move the court against the ‘draconian’ VAT. “By giving sweeping powers to sales tax officials we are moving backwards to the licence raj where the tax department officials were the kings.
If the government thinks that it is going to collect more tax through VAT, then why are they talking of compensating the state government. However, we are waiting for the blueprint of VAT norms. Once it is released we will consult our advocates and move the high court,” says Thacker.
