labels: confederation of indian industry, economy - general
TN government urged to implement VATnews
26 June 2006

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:

State Revenues under VAT
in 2005-06
Pre-VAT revenues
Delhi Rs5,686 crore Rs4,201 crore
Maharashtra Rs18,669 crore Rs16,815 crore
Haryana Rs4,400 crore Rs3,731 crore
Kerala Rs6,937 crore Rs6,648 crore
Karnataka Rs 8,079 crore Rs7,545 crore
Punjab Rs4,281 crore Rs3,366 crore
Andhra Pradesh Rs12,570 crore Rs11,022 crore
West Bengal Rs5,406 Rs5,086 crore

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.

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TN government urged to implement VAT