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MUMBAI
JANUARY 17, 2007
Recent changes in the Harmonized System of Nomenclature (HSN) or the
Harmonized Code for certain IT products, have raised confusion in the minds of
IT vendors and channel partners as some of the states have categories the VAT
rates based on the HSN code. Among the states that follow the HSN code for
categorizing VAT rate are: Karnataka, Maharashtra, West Bengal, Haryana, Kerala,
Punjab, Delhi and Chandigarh.
The changed HSN code for certain products like monitors, printers, cartridge
and digital cameras, now puts the products under HSN code classified for VAT of
12.5 percent, which earlier attracted 4 percent.
Industry partners have observed that there is no clarity on the applicable
VAT rate on such products. "Going by the changed classification, monitors,
printers, cartridges and digital cameras are now liable to attract a VAT of 12.5
percent," said a industry observer.
While the state governments are yet to come out with a notification
indicating the same, key IT associations of the country like TAIT, MAIT and
COMPASS have all sent representations to the concerned state governments and
empowered committee of the state finance ministry to correct the anomaly.
"This is just a technical anomaly that has created the confusion. I am sure
the state government will come out with a notification to clarify the same. I
don't think the governments will effect a change in the VAT just because the
harmonized code has changed," Said Umang Mehta official spokesperson for
TAIT.
Umang argues that the government will never have different rate of VAT in
different states for the same set of products as it will simply defeat the
purpose of implementing VAT across the country.
According to Uman we can expect to see a notification coming from the
government in the next 10-15 days.
Madhya Pradesh, Rajasthan, Gujarat and Tamil Nadu are some of the states that
have not linked the VAT rate with the HSN code but have fixed the rates based on
the description of the goods.
What is HSN?
Harmonized System of Nomenclature or Harmonized code, is a tariff
classification system of the World Customs Organisation (WCO). It allows
merchandise to be identified across nations without error, assigning an
eight-digit number for each commodity. It updates the HSN every five years and
countries which are members of the body have to adopt the new system. Indian
customs departments follows the HSN system.
On December 30, Finance Ministry, as per its commitment to the WCO, effected
changes in the HSN for certain IT products including monitor (CRT and LCD),
printers, multi-functional devices and digital cameras (including still-image
video). All these products are covered under IT Agreement of WTO of which India
is a signatory.
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