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TIOL-DDT 34 · Tuesday, 18 January 2005 · story 4 of 4

DGFT invites suggestions for Foreign Trade Policy 2005-06

By Vijay Kumar

The suggestions may be sent to Policy-IV Division, DGFT(Hqrs), Udyog Bhawan, New Delhi latest by 24th January 2005.

It started in Brazil in the 60’s and spread to Europe in the 70’s and is now a reality in over 130 countries. Though in India, there is a well maintained VAT system for excise, this concept has somehow not percolated to the states. It seems to be happening now. It all started with a meeting of Chief Ministers convened by the Finance Minister(as he then was) Dr. Man Mohan Singh, in 1995. Ten years later and with the good Doctor as Prime Minister, it is all set to take off. Vat is most likely to be effective from April 2005. The whitepaper describes the advantages of VAT as

  • a set-off will be given for input tax as well as tax paid on previous purchases

  • other taxes, such as turnover tax, surcharge, additional surcharge, etc. will be abolished

  • overall tax burden will be rationalised

  • prices will in general fall

  • there will be self-assessment by dealers

  • transparency will increase

  • there will be higher revenue growth

  • The VAT will therefore help common people, traders, industrialists and also the Government.

  • It is indeed a move towards more efficiency, equal competition and fairness in the taxation system.

You must have already read enough about the VAT that DDT does not want to add to your woes, but will give you here the highlights of the scheme as already covered by Taxindia’s editorial team.

  • VAT on 550 goods from April 1, 2005

  • CST to be phased out

  • Twin VAT rates of 4% and 12.5%

  • medicines, drugs, all agricultural and industrial inputs under 4% VAT

  • Special VAT rate of 1% on Gold and Silver ornaments

  • VAT on AED items relating to sugar, textile and tobacco not to be imposed for one year

  • Input tax credit on capital goods to be available for traders and manufacturers

  • Credit on capital goods may be adjusted over a maximum of 36 equal monthly installments

  • Negative list for capital goods not eligible for input tax credit

  • Small dealers with gross annual turnover not exceeding Rs 5 lakhs not liable to pay VAT

  • Liquor, Lottery tickets, Petrol, Diesel and Aviation fuel to be outside VAT but continue to be under Sales Tax Act

To err is human - and to blame it on the Government is even more so.

Until Tomorrow with more of DDT

Have a Nice Day