Confusion surrounds VAT implementation

Channel partners are confused over the implementation of value-added tax (VAT). To start with not many are sure whether it will be introduced on April 1st, despite the government's statement that Maharashtra will introduce VAT on 1st April. Asks Raj Saraf, CMD, Zentih Computers, “How could Maharashtra alone implement VAT when other states are not ready with their legislation for it?” 

Says Rajesh Goenka, Divisional Head, Rashi Peripherals, "No one knows for sure whether it will implemented or not on April 1st. We have not received any official notification about it yet." 

Rajkumar Agarwal of Aurigon is more forthright, "I doubt the government will introduce VAT before the general elections at all!" Umang Mehta of Roop Technologies and Kamlesh Kathod of Pune's Bela Computers too are adopting a wait and watch stance. 

Says Kamlesh, "The government has not given out any details on how the transit from the older taxation system to the new VAT model will take place. No guidelines have been given about carrying forward of old inventory. There are no clear cut directions on which products will attract what percentage of tax."

Rajesh seconds this, "Very few in the channel are aware about VAT and its repercussions and how it will be implemented in the state. At the moment, only two other states, Madhya Pradesh and Karnataka, are geared to go ahead with VAT implementation. Unless all the other states implement it simultaneously, it will lead to more chaos, as there is a lot of inter-state business that goes on." 

Umang Mehta points out that while the government had clarified that dealers will get credit for the inventory that would be carried over to the month of April, this credit will be given only in July 2003. "We would like to know why this delay of three months?" he questions.

He also adds that another cause for concern is the government's statement that all concessions on development zones will be lifted in states implementing VAT. "If all the states do not implement VAT uniformly, then there will be disparity between prices of products. The prices of products from non-VAT states will be lower than those in VAT-states," he points out.

SS Bapat, Country Champion-Uptime Solutions, Emerson Network too feels that the VAT concept is good, but it does not make sense for a few states to implement it in isolation. "This might affect the inter-state sales transaction. For VAT to be successful then it has to be implemented across the country."

Besides this, Rajkumar feels that the government ought to do away with other taxes like surcharge or else the dealer will be heavily burdened. Kamlesh agrees with him.

However on the brighter side once VAT is implemented, gray market business will come down. Says Umang, "This is because everyone with business over Rs 10 lakh will be registered and will have to pay for the sales done by him. This means that gray market players will have to become registered or quit this business." 

VINITA BHATIA