Goods and Service Tax is going to replace the existing VAT/Sales Tax system in India by 2010 — this is the announcement made by the Union and State Governments.

We hear clamour of bureaucrats from around the corner through newspapers and television media, dubbing the GST as the single most important revolution to happen in the field of fiscal legislation in India ! But, however, the prudent citizen of India and more particularly tax professional fraternity are not sanguine about all the brouhaha and bravado ! On the contrary they have got a déjà vu feeling.

And the citizen of India and tax professional fraternity are not piqued for nothing but they have got reasons to substantiate the same.

When Value Added Tax (VAT) was to be introduced, a great fanfare was made which ultimately turned out to be a damp squib ! Let us come to specific points.

When VAT was to be introduced, the single-most reason which was canvassed was that of ’uniformity’ in VAT laws across the country. Big-big slogans were used. "Single country . . single market" !

But, whether this objective is achieved after introduction of a VAT in almost all the States of India ? The answer is in big ‘NO’.

When we studied VAT Laws of different States we found that the political will to bring ‘uniformity’ was conspicuously missing ! The States did not care to follow even the guidelines declared in the ‘White Paper’ by the Empowered Committee. The White Paper has acted only like a jingle of a commercial advertisement — to lure the common citizens ! And nothing is found in reality of what was stated in the white paper.

We know very well the power-hungry nature of politicians and the bureaucrats — we know that they cannot live without that. So, as far as the issue of taxing a particular commodity at a particular rate, we do not insist on ‘uniformity’ though it is highly desirable and promised by them.

Our simple demand is that the heavens would not have fallen if they had maintained ‘uniformity’ in procedural aspects of the law.

Take the instance of ‘turnover limit’ for ‘registration’. Different States have got different criteria for the ‘threshold limit’ and ‘registration’.

They could have kept the threshold limit very well identical so that if any businessman wants to plan opening his business across the States of India he can do so with much ease.

What happens if the requirement for obtaining a registration is kept similar in all the States ? Nothing will happen — particularly to the authority of the department. But at least there is uniformity in that. Try to get VAT registration in different States and you will be slapped with ‘different lists of requirements’ ! Application fee is different in different States. Some States insist on ‘deposit’, then some States want ‘Bank Guarantee’, some States insist to have permanent place of business in the State and do not recognize the concept of ‘Non-Resident Dealer’ at all.

What happens if the ‘periodicity’ of filing the returns is kept same in all the States ? Nothing adverse is going to happen. On the contrary it would be easier for a businessman to discharge his tax liability in different States in which he is carrying on his business.

Why not have a ‘uniform’ criteria of tax/turnover for filing a monthly, quarterly or a half yearly returns ? Each State has got different criteria for this ! Is it going to serve any useful purpose ? No. What we find is total apathy of the politicians and bureaucrats to this aspect.

So also, provisions concerning penalty for late filing of return or interest on late payment of tax could have been made similar. So, the new VAT law suffers the same drawback which the old sales tax law had. Only the name is changed but all the old drawbacks are continued.

All the States have miserably failed in achieving this objective. Or may I say they deliberately failed to bring harmony in tax rates in view of diverse forces of politics ?

There was an argument that in VAT regime there would be no cascading effect of tax. But then who prevented them from removing this effect in the Sales Tax regime ?

The question is, to achieve this effect, whether it was necessary to scrap the entire Act ? The answer is again ‘no’. In the year 1995, Maharashtra had introduced VAT with amending only the required sections and keeping other provisions intact. In that case the dealers and professionals are not confronted with an entire new set of law and do not have to waste precious man-hours in understanding the same.

As ‘equity and tax are strangers’ so is the case with ‘tax and simplicity’ in India ! We fail to understand what simplicity the VAT regime has brought. Rather it has added more to its complexity. Take the simple example of obtaining a refund.

Previously in sales tax regime, just claiming refund in the return was enough. But now in VAT regime you have not only to claim it in the return, but are also required to file separate application in form No. 501. Not only that, the Annexure which is prescribed with it is the most onerous task to comply with. Even if a dealer has to claim refund of Rs.1,000 he has to furnish details of all the purchases which he has made during the entire year, with name of the party, its registration no, net amount, VAT charged, etc.

Whether any person of sound mind can call this ‘simplicity’ ? And again, carry forward of refund in the next year is not permissible (except for the first 2 years where administrative concession was granted), while in the Sales Tax regime there was no prohibition on that.

The States have miserably failed to fulfil the promises given at the time of introduction of VAT. It would be interesting to note how ‘simple’ GST is drafted !

And, the citizens of India and tax professionals are now nonchalant when they hear all the ode and eulogy about the GST. They definitely do not want old, nay, stale wine (read ‘old drawbacks’) in a new bottle but what they expect is refreshing liquor ! (read ‘genuinely simplified law’).

Thank you,