(a) whether Standing Finance Committee of the Union Government
had issued a directive recently to the States regarding introduction
of New Value Added Tax System (VAT);
(b) whether VAT is a better method of taxation;
(c) if so, the details thereof;
(d) whether this will make easy to nab the tax evaders; and
(e) if so, the detailed particulars thereof?
MINISTER IF STATE IN THE MINISTRY OF FINANCE (V. DHANANJAYA KUMAR)
(a): In the Conference of Chief Ministers/State Finance Ministers,
held on 22.6.2000 it was decided by consensus that States which
can implement VAT by 1.4.2001 may go ahead. For others, the Standing
Committee of State Finance Ministers will prepare milestones and road
map. The Standing Committee of State Finance Ministers which has been
converted into Empowered Committee met on 21.7.2000 and endorsed this decision.
(b)&(c):VAT is a multi-stage levy, wherein tax is levied on value
added at all stages of production and distribution process. Since the
value added component is taxed only once, there is no cascading effect of the tax.
(d)&(e):VAT would help in the reduction of tax evasion, since the
tax would not be concentrated at any one level. Also, it requires
tax invoices to be issued, as subsequent dealers would need to maintain
the invoices, in order to benefit from tax deduction. This would enable
tax authorities to cross-check the declared transactions between
the tax payers, consequently reducing the propensity to evade tax.