The Hindu Business Line : VAT a step towards common taxation system: CII

Mr Y.C. Deveshwar (second left), President, CII, at a press conference in Chennai on Thursday along with (from left) Mr R. ParasuRaman, Chairman (Southern Region); Mr N. Srinivasan, Director General; Mr R. Seshasayee, Vice-President; and Mr B. Santhanam, Chairman (Tamil Nadu). — Bijoy Ghosh

Chennai , July 7

THE Confederation of Indian Industry believes that the value-added tax (VAT) system that most States have switched over to is only an intermediate stage and the ultimate objective should be to have a single, common, harmonised system of taxation throughout the country.

Addressing a press conference here on Thursday, Mr Y.C. Deveshwar, CII President, said the chamber was in favour of a single goods and services tax.

A uniform tax system would help establish a common market within the country and help industry reap the advantages of economies of scale that such a large market presented.

To a question, Mr R. Seshasayee, Vice-President, CII, hoped that the Tamil Nadu Government would switch over to VAT at the earliest. (Tamil Nadu is among the handful of States that have not moved to the new system.) The State could not be an island when all others around it have moved to VAT. Though there was no immediate impact of not switching over to VAT, in the long term, there would be some impact.

It was a "mixed situation," he said, in response to a question on the impact of VAT that came into effect from April 1, 2005.

There was no question that VAT would take away the cascading effect of taxation and thus make industry more competitive. VAT would also broaden the tax base, as it would establish links within the chain.

The setbacks in initial stages, Mr Seshasayee said, were quite to be expected, particularly in producing areas. This was because of an adjustment process.

He was confident that the wrinkles would get ironed out shortly.

On reservation in the private sector, Mr Deveshwar said the CII was in favour of the Government's objective but did not believe that reservation was the method to go about achieving it.

The industry body believed that the organised sector should continue to be competitive to create more employment opportunities.

A competitive and buoyant organised sector would in turn generate more employment in the unorganised sector, which provided bulk of the jobs.

For the country to sustain a high level of economic growth, it needed to transform the rural economy in such a manner that the income levels were raised, Mr Deveshwar said.

For this a number of things needed to be done. This included creating a single common market in the country, of which VAT was the first step.

A moderation in taxation was needed so that the tax base was enlarged as a result of which, whilst the cost to the company was lowered, there was buoyancy in collections.

There was also need for a progressive and systematic integration with the global economy.

Industry too had to overcome some challenges, he said identifying reducing emissions as one such if the country was to grow at a faster rate.

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