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The consumer organisations in the State of Uttar Pradesh (UP) met today under the chairmanship of Mr. Bejon Misra, Executive Director, Consumer VOICE and condemned the agitation planned by certain vested group in UP against the implementation of Value Added Tax (VAT) in the State of Uttar Pradesh from 1 st January 2008.
Mr. Vijay Acharya, Director General of UP State Consumer Protection Council said: “ever since the introduction of new economic policies of LPG (Liberalization, Privatisation, Globalisation) in India under Narasimha Rao's government, the debate regarding the restructuring of Indian fiscal system also has been initiated. The Indian Economy is on race with other nations due to globalisation and its transformation to a market economy”. The emphasis on new reforms is to broaden the tax net and make it simple so that a layman can understand it. Since ages always a reform is made for the benefit in the process of development. The first Income Tax was introduced in 1860. He further said that: “the main taxes collected by the State Governments are taxes on sale or purchase of goods. VAT (Value added Tax) is a novelty that has claimed international attention as more countries are adopting it in varying degrees to restructure their systems of taxation”.
VAT was introduced in the year 2005 in India. VAT (Value added Tax ) is levied on all goods & services .VAT will replace the present sales tax in India. VAT, in simple terms, is a multi-point levy on each of the entities in the supply chain with the facility of set-off of input tax - that is, the tax paid at the stage of purchase of goods by a trader and on purchase of raw materials by a manufacturer. Only the value addition in the hands of each of the entities is subject to tax. Mr. Bejon Misra, Executive Director, Consumer VOICE said that: “originally it was planned that VAT would be simultaneously be implemented across all the states. However a few states decided to opt out of VAT system, which unfortunately included UP. This has led to shift of trade between states due to differences in the rate structures between states having VAT system and those having sales tax system. It has demonstrated that Uttar Pradesh has lost high amount revenue due to non-implementation of VAT, while States who implemented VAT has gained in terms of raising high revenue, even though the Centre has come forward to compensate the states for the revenue loss”. He further said that: “the introduction of VAT created a furore in some of the States like Uttar Pradesh because of its direct impact on the tax evaders. It was miscommunicated that cascading effect would increase. The outcry was due to poor communication and lack of information amongst the traders and business community in Uttar Pradesh. In spite of such criticisms there was a good response to revenue collections form the states that had implemented it”.
Sales tax has always been one of the main contributors to both the State and the Central exchequers. While its basic role is that of a revenue generator, it can also be used as a driver of development and trade. The introduction of VAT in India is for two reasons. First it will form part of the fiscal consolidation strategy for the country at macro level. Second, VAT will help India in the International trade. Thus, VAT is beneficial in the long run with its high revenue-income elasticity. It is a rationalized tax structure, practiced and proven to be successful in many leading economies. It is a rationalized tax structure, practiced and proven to be successful in many leading economies. In fact direct tax are suitable to design a progressive tax structure, given the extreme inequitable income distribution in developing countries. Studies on tax reforms reveal that the tax systems in developing economies have not yielded more revenue. Finally the impact of tax reforms is regressive.
Mr. Abhishek Srivastava, Chairman, Consumer Guild said “many sections hold the view that the trading community has been amongst the biggest offenders when it comes to evading taxes. Under the VAT system, no exemptions will be given and a tax will be levied at each stage of manufacture of a product. At each stage of value-addition, the tax levied on the inputs can be claimed back from the tax authorities. One particular advantage is that of the widening of the tax base by bringing all transactions into the tax net”.
Every government turns to an array of forms of public finance, to aid the fiscal deficit and ever increasing public expenditure. The revenue of Indian government largely comprises of taxes. Over the last three fiscal years about 57% has come from customs and excise collections. Direct taxes such as corporate and income taxes contributed to 40%.
Fiscal Deficit Specifically, VAT gives the new government the opportunity to bring back into the tax system all those persons and entities that were given tax exemptions in one form or another by the previous regime. In India Tax Credit method is followed. VAT can be computed by using any of the three methods detailed below
• The Subtraction method:- The tax rate is applied to the difference between the value of output and the cost of input.
• The Addition method: The value added is computed by adding all the payments that is payable to the factors of production (viz., wages, salaries, interest payments etc).
• Tax credit method: This entails set-off of the tax paid on inputs from tax collected on sales Mr. Arun Kumar Misra, President, Bharatiya Upbhokta Sangh said : ”the consumer organisations have been struggling with the Government for the last 30 years to rationalise the tax structure in India and make it consumer-friendly but as it has been a State Subject, the Central Government after organizing several consultations with the State Governments, finally decided to introduce Value Added Tax (VAT) in place of the earlier regime of Sales Tax, which has proved helpful to the State and also the consumer. It has been observed that the States which have implemented VAT have raised more revenue and the consumers not only accessed genuine products but also the taxes paid by them have reached the Government for undertaking several development and welfare activities in the interest of the consumers”.
Mr. Anupam Srivastava was very forceful in the meeting and said “consumer organisations must prevail over the Uttar Pradesh Government and convince them not to succumb to such agitations and pressures from certain small sections of the business and traders community who have are working only to enrich themselves at the cost of the poor and honest consumers”. The other members present were Mr. Lavi Tikkha, President, Awadh Upbhokta Hit Sanrakhan Samiti and other members of the Consumer Coordination Council www.core.nic.in and Indian Federation of Consumer Organisations.
For further details and one-to-one interview you can contact: Mr. Bejon Misra, Executive Director, Consumer VOICE, www.consumer-voice.org Mobile: +91-9311044424 and 9811044424 and Mr. Abhishek Srivastava at Mobile +91-9450360760 consumerguild@rediffmail.com www.bijlidost.org
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