Chennai: Reacting to the Tamil Nadu government's decision not to implement the value added tax (VAT) the Confederation of Indian Industry (CII) has urged that the decision to be reconsidered.

According to Sanjay Jayavarthanavelu, chairman, CII, Tamil Nadu, a simple, predictable VAT regime with a moderate rate would promote efficiency, competition and the growth of a common market. VAT implementation will significantly improve tax compliance and will also help increase revenue growth for the state.

He said that since the total effect of the VAT system would amount to rationalisation of the tax burden, the system would bring down the price level thus helping the common man and traders. He pointed out that small and medium enterprises account for major production output in the state and hence, the delay in VAT implementation would lead to diversion of capital and business to the neighbouring states.

According to Jayavarthanavelu, Tamil Nadu's key industrial sectors such as auto components, leather, sugar and SME industries across the board are unable to compete with the units in the neighbouring states.

He said, VAT boosted the revenue growth of States that implemented VAT by 13.8 per cent during fiscal 2005-06 to touch Rs76,903 crore against Rs67,588 crore recorded in the previous fiscal.

Tax revenues of some of the major VAT-implementing states during April-March 2005-06 are:

In the first two months of the current fiscal, Chattisgarh, with a collection of Rs206.86 crore, has registered a healthy growth rate of 42 per cent during April-May over the previous year, Gujarat, with a collection of Rs1,725.34 crore, has witnessed a growth rate of just 11 per cent in tax collection over April-May 2005.

Similarly, Madhya Pradesh has registered a growth rate of 45 per cent during April-May over the previous year with collections of Rs495 crore, while Rajasthan has clocked a growth rate of 23.5 per cent with VAT collections of Rs936 crore. Jharkhand, clocked a growth rate of 21 per cent over April-May, 2005.