The Hindu Business Line : With VAT ticking, fears lurk in deep recess

WE all spent weeks after weeks watching cricket, and then Bush's Iraq safari got our attention. Now, closer home, there are only hours to go for VAT to be tightened and the taxpayer hoisted into a new regime that is being promised to be simpler, logical and uniform. And nobody is yet screaming about the new noose, though fears lurk in deep recesses.

What is VAT?: It appears that you are sober, for otherwise you might have asked "Vat is what". Very simply, VAT is an abbreviation that may be spelt V-A-T or read as an acronym. Either way, it stands for value-added tax - a tax added to value of product. They add VAT to the estimated value of a product or material at each stage of its manufacture or distribution. In the end, however, VAT is paid by the consumer.

I am a teetotaller. Should I think of VAT?: You may keep off from VAT 69 Blended Scotch Whisky, which contains around 35 per cent malt and which was first produced in 1882 by William Sanderson of Lieth. But there may be no escape from the VAT we are talking about.

There are some who object to the wrong name for the new tax. It is but historical that the word got associated with what you detest, because - as a Web site explains - a `vatted malt' is not malt that has suffered VAT but contains a number of malt whiskies that have been skilfully blended together or "married" to create a consistent whisky with its own distinct, identifiable character.

Some argue that when they wanted to name the tax, they could have called it AVT for added value tax, or VAD for value-added duty, as in the case of customs or excise.

I am getting confusing signals about VAT: That's normal, because on one side, they say prices would go up when VAT is up and running from April 1, 2003. On the other, the FM has made an ample provision for revenue loss to the States. So, the confusion is where all that extra money that consumers would pay will end up in.

If `bat' is both a noun and a verb, how about VAT?: Yes, as a transitive verb, you have vat-ted, vat-ting, but that means treat or put something in a vat, that is a large container used for holding liquid. The origin is 12th century, Encarta indicates, from Old English fæt, that meant vessel. Vat. is an abbreviation of Vatican. Getting back to the latest tax, what is VAT-table is where you suffer VAT when buying a product or service.

First, Jaswant put money in our pockets, and now he is adding something more! This is a reasonable confusion, because the phrase `value-added' is added to almost every product to hype its features.

Which is why people shop for a value-added broom (that is retractable) rather than the dumb old one; go to value-added eateries (where they sell high-prized pizzas but give a free Coke); or consult a value-adding professional (who keeps adding new cars to his stable by subtracting from your bank account).

A value-added tax is not a jazzed up tax that will give you money, rather than taking, but it is a tax on value addition. To be precise, the word `added' applies to value and not tax.

hindubusinessline@hotmail.com

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