Addressing a press meet, the chamber President, Mr Jose Dominic, and the Vice-President, Mr Satish Murthy, said that the VAT was introduced in the country to avoid cascading of taxes and to foster a common Indian market. However, by imposing VAT on MRP of packaged goods, the State Government was slowly but steadily giving rise to a number of problems within the State, they said.

Most companies operating in the State said that they would not exercise the VAT on MRP option, but will continue to pay VAT at appropriate rates as per existing practice and law as prevailing across the country.

COURT RULING

The chamber pointed out that the Supreme Court had upheld the decision of the Rajasthan High Court to the effect that tax on the first point of sale based on MRP is legally unsustainable for any commodity. In this context, the chamber said that the industry was on the right side of the law and it appealed to the Government to resolve the impasse.

If first sellers or manufacturers were compelled to levy VAT on MRP, the chamber pointed out that the trade prices for most goods would result in higher MRP for Kerala alone. This would open the floodgates to illegal inter-State movement of goods.

It would have adverse impact on the State's tax collection.

It would also result in lowering of margins for retailers, who in turn, would most likely start overcharging consumers to make up losses on account of forced VAT, the chamber said.

Consumers worst hit

According to the chamber, the consumers are going to be the worst sufferers in view of the present situation. Already burdened by inflation and high taxation, this artificial shortage is going to lead to unscrupulous elements taking advantage and further increasing prices of these products.

The chamber also regretted that the fact that some trade associations seemed to be pursuing the hard line of preventing traders and salesmen from carrying on with their legitimate business in dealing in packaged goods and in particular tobacco products. Some of their members were using strong-arm tactics to dissuade the sale of such products. This is escalating into a major law and order issue within the State.