The value added tax was introduced as an indirect tax into the Indian taxation system from 1 April 2005. The existing General Sales Tax Laws were replaced with the Value Added Tax Act (2005) and associated VAT Rules. Haryana became the first State in the country that had adopted the taxation on 1 April 2003. Few states Gujarat, Rajasthan, Madhya Pradesh, Chhattisgarh, Jharkhand, Uttarakhand and Uttar Pradesh opted to stay out of VAT taxation system during the initial introduction of VAT, before adopting the VAT at a later date. As of 2 June 2014, VAT has been implemented in all the states & union territories of India HistoryEdit OECD (2008, 112–13) cites Chanchal Kumar Sharma (2005) to answer why it has proved so difficult to implement a federal VAT in India. The book quotes: Although the implementation of broad-base federal VAT system has been considered as the most desirable consumption tax for India since the early 1990s, such a reform would involve serious problems for the finances of regional governments. In addition, implementing VAT in India in context of current economic reforms would have paradoxical dimensions for Indian federalism. On one hand economic reforms have led to decentralization of expenditure responsibilities, which in turn demands more decentralization of revenue raising power if fiscal accountability is to be maintained. On the other hand, implementing VAT (to make India a single integrated market) would lead to revenue losses for the States and reduce their autonomy indicating greater centralization (Sharma, 2005, as quoted in OECD, 2008, 112–13) [1] Chanchal Kumar Sharma (2005:929) asserts: political compulsions have led the government to propose an imperfect model of VAT Indian VAT system is imperfect to the extent it goes against the basic premise of VAT. India seems to have an essenceless VAT because the very reasons for which VAT receives academic support have been disregarded by the VAT-Indian Style, namely: removal of the distortions in movement of goods across states; Uniformity in tax structure. Chanchal Kumar Sharma (2005:929) clearly states, Local or state level taxes like octroi, entry tax, lease tax, workers contract tax, entertainment tax and luxury tax are not integrated into the new regime, which goes against the basic premise of VAT, which is to have uniformity in the tax structure. The fact that no tax credit will be allowed for inter-state trade seriously undermines the basic benefit of enforcing a VAT system, namely the removal of the distortions in movement of goods across the states. Even the most essential prerequisite for success of VAT i.e. elimination of [Central sales tax (CST)] has been deferred. CST is levied on basis of origin and collected by the exporting state; the consumers of the importing state bear its incidence. CST creates tax barriers to integrate the Indian market and leads to cascading impact on cost of production. Further, the denial of input tax credit on inter-state sales and inter state transfers would affect free flow of goods. (Sharma, 2005:922) The greatest challenge in India, asserts Sharma (2005) is to design a sales tax system that will provide autonomy to subnational levels to fix tax rate, without compromising efficiency or creating enforcement problems. States where VAT is applicableEdit Andhra Pradesh In the Indian state of Andhra Pradesh, the Andhra Pradesh Value Added Tax Act, 2005 came into force on 1 April 2005 and contains six schedules. Schedule I contains goods generally exempted from tax. Schedule II deals with zero rated transactions like exports. Schedule III contains goods taxable at 1%, namely jewellery made from bullion and precious stones. Goods taxable at 5% are listed under Schedule IV. The majority of foodgrains and goods of national importance, like iron and steel, are listed under this head. Schedule V deals with Standard Rate Goods, taxable at 14.5%. All goods that are not listed elsewhere in the Act fall under this head. The VI Schedule contains goods taxed at special rates, such as some liquor a...............
Posted on: Mon, 29 Dec 2014 11:55:39 +0000
Trending Topics
Recently Viewed Topics
© 2015