simpler terms, this means if a unit has enjoyed a tax
break for five years out of the 10-year holiday period, it
will have to collect the tax for the remaining five years
and pay it after the end of the 10-year term.
effect, blanket tax exemption to industries in locations
like Noida in the state would be cut to half.
consequence will be that companies may not expand capacity
at their existing locations. Noida has become a hub of
auto component units due to sales tax exemptions. Industry
experts said many units could shift to Haryana or
Uttarakhand due to the tax sops offered by these two
in Noida are upset about the tax deferment, but it may not
be feasible for them to relocate to some other place
immediately,” said Satya Poddar, partner, Ernst &
Empowered Committee of State Finance Ministers, an apex
body of states on financial matters, is of the view that
tax exemptions should be capped and turned into deferred
deferred tax arrangement is aimed at ensuring that the VAT
chain is not broken,” said Subramanian Harishanker,
executive director, KPMG.
exemptions and the expected improvement in compliance
under the VAT regime will boost the state’s revenues,
VAT system will also improve the efficiency of industries
in Uttar Pradesh as they will be able to get input tax
credit, which industries in neighbouring states like
Delhi, Punjab, Himachal and Haryana already enjoy.
of input tax credit was hurting industry in Uttar Pradesh.
With input tax credit under the VAT regime, industrial
growth will pick up in the state,” said Nihal Kothari of
the degree of compliance and administration will improve.
The tax rate differentials will be small and price
differentials on goods like refrigerator and washing
machine will be eliminated, experts say.
unauthorised trade taking place between Uttar Pradesh and
other states will also come down due to uniform tax rates
and the availability of input tax credit.
the long run, VAT will improve transparency and revenue
collections,” Poddar said.
Pradesh was the only absentee in the country’s VAT
chain. All states have reported around 21 per cent
increase in revenue in 2006-07 after implementing VAT.
: Business Standard - Mumbai, Maharashtra, India, dated