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CHENNAI, March 20

TAMIL Nadu should do away with multiple levies such as surcharge, additional sales tax and entry tax under the finalised value added sales tax (VAT) regime to fully benefit from the advantages that VAT offers, according to the Federation of Indian Chambers of Commerce and Industry (FICCI).

While welcoming the draft VAT bill, FICCI, in a press release said the companies need at least 45 - 60 days to make changes in their ERP systems to meet VAT provisions.

With a majority of the raw materials procured out of the State, the manufacturers are at a disadvantage if the Central Sales Tax is continued because it would increase the cost of the final product since VAT does not provide for tax credit on CST purchases. Pondicherry and Silvassa levy CST at 1 per cent. Therefore, CST needs to lowered or totally done away with, according FICCI. Industries should also be permitted to give a self-declaration certified by a chartered accountant for inter-State transactions instead of providing C-forms. At present non-collection of C-forms leads to industries here paying differential tax, which adversely affects their competitiveness. Entry tax needs to be removed under the VAT regime. If it is to be continued the Government will have to consider set off for both traded items and inputs used by the manufacturers.

Entry tax paid on the transition stocks on March 31 should be available as input tax credit on introduction of VAT. But entry tax should not be levied on import from other countries, FICCI said. Pending permission to States to levy tax on sugar under VAT from June 1, the State Government proposes to continue its levy of purchase tax of Rs 63 per tonne and additional sales tax of Rs 23 per tonne on sugarcane. Both these are among the highest when compared to other States and need to be lowered.

These render the mills uncompetitive, and Tamil Nadu being a surplus producer is dependent on sales out of the State. With other State Government exempting purchase tax, Tamil Nadu's advantage is nullified, according to FICCI.

Prior to introduction of VAT, the additional sales tax on sugarcane needs to be removed, purchase tax cut to Rs 20 per tonnes and purchase tax and additional tax on sugar exported should be exempt. Under VAT the sugarcane must be exempt from purchase tax and additional sales tax, and sugar alone brought under VAT.

Input tax credit should be available in full on specified petroleum products such as fuel gas including LPG, kerosene, furnace oil, lubricating oils, quenching oils and greases, naphtha and mineral oils which are used as consumables and are extended Form XVII concession. While finalising the VAT Act, the Government should clearly define capital goods in terms of scope of use and period of taking credit.

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