Year after Govt opposed it, VAT’s the good word?

When the UPA Government implemented Value Added Tax (VAT) in April 2005, the Gujarat Government was among the four states to oppose it on the ground that it was not feasible.

But a year after its implementation in April 2006, the State Government is the happiest because the revenue earnings from VAT in the very first year of its implementation was recorded to be 26 per cent higher than earnings through sales tax in the previous year. VAT replaced sales tax which differed from state to state and was also very complicated.

According to figures available with the Commercial Taxes Department handling VAT, VAT revenue in 2006-2007 was higher by about Rs 2,000 crore than the sales tax revenue in 2005-2006.

The total VAT revenue received between April 2006 and March 2007 was a little above Rs 10,600 crore against Rs 8,400 crore earned by way of sales tax in the previous year, thus an increase of about 26 per cent in total earnings.

Giving reasons for abnormally high rise in VAT revenue in the State, Special commissioner (Commercial Taxes) J P Gupta said while electronic matching of invoices helped in checking avoidance of VAT payment by traders and industrialists, high economic growth in manufacturing sector as well as high transactions in oil and gas sector in the last one year in the State also played a role in boosting the total revenue including VAT.

According to another official, increase in number of VAT registrations after its implementation also contributed to VAT revenue growth. With VAT empowering the authorities to crack down and take action against cold storage, warehouse owners and transporters if they did not furnish account of goods kept in their premises also helped VAT compliance by traders. Under its rules, VAT on goods stored in the premises of transporters /cold storage/ warehouse owners would be claimed from the latter for unaccounted goods in their stores.