Faced with prospects of increased tension between the manufacturers and dealers, industry chambers such as Assocham have sough VAT panel intervention on this issue.

"We have represented to the Empowered Committee. We want the Kerala Government to reconsider this move", Mr. D.S.Rawat, Secretary General, Assocham, told Business Line.

Industry has described this move as a retrograde step in the context of the ultimate shared goal of having uniform practices and procedures across the country and also in the millieu of introduction of a goods and services tax (GST) by 2010.

Industry insiders claim that the Kerala Government proposal may substantially relax documentation requirements for the subsequent dealers in the distribution chain and may encourage incomplete accounting of transactions.

Some of them even contend that the proposal to levy tax on MRP basis would result in price inflation as it encourages dealers to sell products at MRP.