The Hindu Business Line : Assocham moots plan for zero per cent CST

THE Associated Chambers of Commerce and Industry of India (Assocham) has proposed a two-pronged strategy to the Government underlining the need to either reduce central sales tax (CST) to zero per cent or replace it by pre-paid VAT (PVAT) to facilitate introduction of VAT.

In a memorandum submitted to the Finance Ministry, the Assocham President, Mr Mahendra K. Sanghi, pointed out that under the existing constitutional arrangements, the problem of inter-State taxation can be resolved by putting in place zero rating of inter-State sales as also having a system of PVAT.

He said that the levy of CST on the basis of `origin' and the related procedures are the most important factors affecting a united Indian market. Therefore, the first option envisaged in the proposed strategy includes reduction of rate of tax under CST, initially to 2 per cent and subsequently to zero per cent. This will help the States to check the evasion of tax, which is caused due to low rate of tax under CST as compared to the rate under the state sales tax.

As regards to replacing CST by a pre-paid VAT, Mr Sanghi said that all the drawbacks of the CST will be removed when the existing CST is replaced by a system of prepaid VAT (PVAT). ``The proposed system of PVAT will not impose any additional burden on administrative machinery. Nor would dealers in exporting or importing States have to bear any additional cost of transaction. In addition, the system of PVAT will help in reducing the evasion of tax and reduce corruption in the tax administration, which is rampant in obtaining the C Form from the department,'' observed the Assocham chief.

More Stories on : Taxation | Industry Associations

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page