Friday, April 01, 2005

VAT India

India is a country, divided into some 28 states. Thats where the similarity ends. Cultures are different, as are languages. Talk about tax laws (not the centrally administered income tax or professional tax, but local sales tax), and the cultural and language differences seem negligible. Add octroi which is levied on entry into some states, entry tax and soon you are in a maze of rules and complexities.

From this chaotic archaic form taxes, India, attempts to move into what is called a VAT, value added tax. VAT is a simple proposition really, as defined here in wikipedia. ( wikipedia is amazing!). The way VAT is being implemented in India, it is more of a paper based system and not an IT based system (as are most existing taxes) and is not a central VAT, but a state VAT. Also services are not under VAT, just as yet. With all these flaws, it is still a beginning.
Almost everybody agrees right from industry associations, finance ministers, state ministers (this agreement has come about after long years of persuasion) that VAT is the right way to go. But traders went on a 72 hour strike protesting against the implementation of VAT. VAT doesnt affect the profits of traders ( as shown in the Wiki example), so why would they go on a strike ?

The real fear amongst the trader community is that they would have to pay taxes. Many traders indulge only in cash transactions and very few "billed" transactions and pay almost no tax.The government, though, has stuck to its decision of implementing VAT.


Anonymous said...

Have you heard of the tax exchange system built by ICICI Infotech for VAT implementation. Isn't that a way towards paperless VAT in India?

Anonymous said...
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