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M. Ramesh

If the Act comes into force, goods that a dealer may have bought before January 1, would not be eligible for input tax credit, although the dealer would have paid sales tax. This means that the same goods suffer tax twice — once as sales tax, and again as Value-Added Tax.

CHENNAI, March 20

TRADERS in Tamil Nadu are faced with a prospect of having to pay sales tax twice on the same commodities, due to an `anomaly' in the State's Value-Added Tax legislation.

Traders of automotive spare parts alone fear a loss of anywhere between Rs 65 crore and Rs 90 crore on account of this `anomaly'.

The Act says : "Every registered dealer is entitled to input tax credit of tax under the Act on goods held in stock on the date of commencement of the Act, if such goods were purchased not more than three months prior to the date of commencement of this Act".

In other words, if the VAT Act comes into force on April 1, goods that a dealer may have bought from the manufacturer before January 1, would not be eligible for input tax credit, although the dealer would have paid sales tax. This means that the same goods suffer tax twice — once as sales tax, and again as Value-Added Tax.

This, the trade says, is illegal. However, the Tamil Nadu Government is unrelenting. Some sections of the trade are preparing to go to the Courts for redress.

To take the example of the automobile components traders, the total value of all the inventory of motor spare parts in the State could be anywhere between Rs 500 crore and Rs 700 crore. Since in some generic products such as oil filters, bearings, oil seals and greases, there are several brands in the market, a dealer is obliged to stock up all the brands. A lot of products remain on the shelves for more than three months.

The Tamil Nadu Government has collected sales tax on these goods. But according to the Act, only those goods, which changed hands between the manufacturer and the dealer after January 1, would be eligible for input credit. For goods purchased by the dealers before that date, the dealers would have to pay the value-added tax also.

Asked for a comment, the Madras Chamber of Commerce and Industry (MCCI) said the Chamber would take a stand on the issue after its next meeting on March 26.

The Madras Motor Parts Dealers' Association has represented to the Government saying that there should be no time limit for claiming the input tax credit, going by the principle that no commodity shall suffer the same type of tax twice.

Even for the goods that were purchased within three months before the commencement of the Act, the Act requires the dealers to "prove that the tax on those goods was actually paid by him". Again, to do this the dealer has just 15 days' time.

This, according to traders, is next to impossible. "To produce the stock inventory, we would need at least three months' time," says Mr R. Chandramowlee, Chairman, sales tax committee of The Madras Motor Parts Dealers' Association.

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