1. Don’t dilute the RTI Act bolster democracy and governance

1. The above heading to this part of our Column I have chosen from the heading given to the editorial column of ‘The Economic Times’ dated 15-8-2006, since it aptly registers the correct feelings of 125 crores Indian citizens. The present Right To Information (RTI) Act, 2005 is in real sense a true gift given by the Parliament to a common man, so that he can raise a fight with a powerful administrative machinery of the Government, with nominal expenses to expose corrupt practices.
    

2. Since the above Act has come into force, it has already helped common people uncover various scams, and fight corruption and fraud in the delivery of public goods by enabling them to access hitherto out-of-reach information on administrative functioning. Its central aim, however, is to reveal the principles and reasons that inform policy-making. Drawing a veil over file-notings would defeat that purpose. A functional RTI Act, framed by vibrant and modern policies, will heal breach between democracy and governance.
    

3. Yet, the Government was contemplating introducing the controversial bill to amend the RTI Act, to ensure that "File Notings" of the Government are kept out of the public domain. As a result, in the meantime, to oppose the above move of the Government, celebrated social activist and anti-corruption crusader Shri Anna Hazare, went on a hunger strike unto death. In this connection, Anna said any dilution in the Act would not be taken lightly by the people. He further said – "I will give-up my life on the proposed amendment to the RTI Act, here at Alandi, the pilgrimage town where Sant Dnyaneshwar took ‘Sanjivani Samadhi’ over 700 years ago."
    

4. Before undertaking fast unto death, Shri Anna Hazare had written to Prime Minister Manmohan Singh and subsequently to Congress President Smt. Sonia Gandhi to prevent the proposed bill from becoming a dead Act. It is hearting to note that wiser counsel prevailed with Prime Minister Manmohan Singh and Smt. Sonia Gandhi and it is now officially reported (see ‘Hindustan Times’ dated 18-8-2006) that the Government is not keen on introducing the controversial bill to amend the said Act.
    

5. We all should be grateful to Shri Anna Hazare for this splendid achievement. In fact, we are indebted to him for offering his life, to a common national cause for and on behalf of us, and thereby protecting the democratic rights of every citizen.

2. VAT blues VAT on lac, shellac irks Nath

1. As per ‘Economic Times’ report dated 15-7-2006, the imposition of 4% VAT on lac and shellac by the West Bengal Government in the current year, has evoked resentment not only from tribal growers and traders, but from the Union Commerce Ministry as well. Expressing concern over the imposition of tax on lac and shellac in the State, Commerce Minister Kamal Nath has recently written a letter to the State Chief Minister, Buddhadeb Bhattacharjee, urging him to intervene in the matter of withdrawing the tax on the same to protect the livelihood of lakhs of tribals in the State.

The fight over VAT on diapers

2. It may be very interesting to note that the hiccups over VAT are an international phenomena by now. Should diapers be exempted from VAT ? Do they fall under ‘Medical Products’ ? European countries are divided over the said issue. But it is just one of the innumerable issues relating to interpretation of items under VAT, pointed out the learned writer Shri Sukumar Mukhopadhyay, former member, Central Board of Excise and Customs, in an article published in the ‘Business Standard’ dated 19-20 August, 2006. While writing this part of the column, input credit is taken from the said article of the learned writer for which I am indebted to him.

2. The great nappy tax debate in the European Union (EU) has all the elements of a battle royal. Some of the finest legal brains of the European Commission, the executive body of the EU, have already spent hours debating one of the most petty but absorbing subjects of negotiating on a bizarre issue, whether to exempt diapers; i.e., ‘babies’ nappies from VAT. Countries like Czech Republic, Portugal, Poland, Hungary and Malta have exempted nappies from EU’s minimum rate of duty (VAT), which is currently 15%. Their interpretation is that nappies fall under "Medical Products" – an interpretation, which needs one to stretch his imagination, a bit too much. The UK does not tax nappies at all because of grandfathering rights negotiated during their entry into the EU. This interpretation has not been accepted by most other countries. In fact, the EU’s Tax Commissioner has been preparing his case with the support of other dissenting countries to launch a legal challenge against these five European countries, which, according to them, are applying wrong rate of VAT on diapers. Here, it is interesting to note that while there happen to be thousands of cases in a year against infringement of the rate by EU countries, this one in particular has got the countries divided into two opposite cams.
    

3. The issue obviously is one of the definitions of "Medical Products". Nappies are usually available in medical shops and, therefore, the pro-exemptionists contend that such goods are known in the market, as medical products, and should be taxed on the basis of that definition. On the other hand, the opponents claim that the interpretation is wrong since many non-medical products are also available in medical shops.
    

4. As if the above controversy is not enough, exemption on lower rate of restaurant bills, France being in favour of it.
    

5. In India too, we have not lagged far behind in this respect. In fact, we have done one better. And we may draw some consolation from the fact that even the EU, the home of VAT, is having the same type of controversy, which does not relate at all to any grand economic policy but to ordinary consumer items of daily use. Classification of commodities on the basis of their scientific definition as against their definition in common parlance, has been a matter of intense controversy in High Courts and the Supreme Court. There have been interesting cases in the Supreme Court relating to vegetables such as chilly, coconut, ginger and lemon.
    

6. When VAT was introduced in Maharashtra, the dealers were assured that there would not be any exemptions and forms to claim deduction from the taxable sales. However, considering the above background, the conclusion is that just having VAT does not end the controversy on exemptions. There are innumerable issues of interpretation regarding defining items under the VAT regime even in the EU. Such non-issues will continue to be debated in a grand fashion so long as the authorities continued to be populist irrespective of whether it is VAT, income tax, sales tax, service tax or customs or excise, etc.