Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: TDS :: list of goods taxed at 4% :: VAT RATES :: due date for vat payment :: empanelment :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: ACCOUNTING STANDARD :: ACCOUNTING STANDARDS :: VAT Audit :: cpt :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes
VAT (Value Added Tax) »
 Is it a modified Value Added Tax?
 GST regime: VAT Commissioner and CBEC to work with businesses
 Amendments in the Second Schedule appended to the Act (Delhi Value Added Tax Act, 2004)
 Guidelines relating to downloading of Statutory Forms-Modification thereof
  Grant of Registration under DVAT & CST
 VAT on petroleum products to continue, to be decided by GST Council
 Government rolls out settlement scheme to clear VAT, CST dues
 Maharashtra government offers VAT benefit to realty buyers
 Govt should focus on income tax instead of VAT
 Amendments in the second Schedule received from Finance Deptt.
 VAT exemption stays in tax reform bill

CAG study: Evasion lead to deceleration in VAT revenues
December, 20th 2010

Amid states claim that switch over to VAT has resulted in substantial growth of revenues, government auditor CAG has found tax evasion leading to deceleration in tax receipts in many states post VAT, that is touted as predecessor of proposed national-level GST. Lacunae like deviation from agreed rates have also come into light in a study report compiled from Accountants General of 23 states and deficiencies noticed in other compliance audit exercises.

This prompted CAG core team, that conducted the study, to recommend that a mechanism should also be installed to monitor any deviations from GST rate, that could distort the national-level indirect tax system, implementation of which has seen delay of two years from the original schedule.

"Of the 23 states in our study, we found that ten states have registered a dip in the average growth of revenue during the post-VAT regime against those relating to the pre-VAT periods," said the study, that covered a period between April 2005 and March 2009. These states included a few of the major states like Gujarat and Tamil Nadu. "Since there has been a quantum increase in tax base in all the states after implementation of VAT, the decelerations can mainly be attributed to tax evasion," the study said.

It added there has been a downturn in the growth rate of collection post-implementation of VAT in 12 out of 23 states, in three states it registered an increase and in the remaining eight states the growth rate was inconsistent.

The Empowered Committee of state finance ministers on VAT has been saying that VAT has resulted in very good revenue growth. In fact, committee chairman Asim Dasgupta had said recently, "VAT collections registered a 30 per cent growth during the first seven months of this fiscal."

But is this growth a result of wider base of VAT compared to sales tax or improved compliance? CAG has something to say on this. "Other things being equal, VAT must lead to mopping up of revenue simply because VAT is invariably broader than the taxes which it replaces," the study said.

On uniform tax rates, which was one of the main purposes of VAT, the study said, "the states are tweaking the rates on their whims, thus creating distortions." It said there were significant variations between the tax rates of same commodities across the states and even after lapse of 4 years, the issue still remains unresolved. This prompted the study to recommend,"install a mechanism to monitor any deviations in the GST that distort the GST."

VAT, that replaced sales tax from April 1, 2005, in most states before all states adopted it, was supposed to cover 550 goods, of which 46 goods are exempted, 270 items are to be taxed at 4 per cent and the remaining commodities at 12.5 per cent. The Centre has proposed three rates of GST, whose fate hangs in balance because of differences between the states and the Union Government.

The proposal said goods should be levied at 6 per cent (each by the Centre and the states) and 10 per cent, while services at 8 per cent. The differences between the Centre and the states, first over the structure, and now over the Constitution amendment bill has already led to missing of original deadline of April 1, 2010. After this, the Centre said it would make efforts to implement it from April 1, 2011.

Recently, Finance Minister Pranab Mukherjee had said he would desire GST to be implement along with Direct Taxes Code from April 1, 2012. While VAT is a state level tax, GST would be imposed both by the Centre and the states on common goods and services and would replace VAT, as well as excise duty and service tax at the Centre.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Publishing Management System PMS News Management System Publishing Management System Development Online News Management System for media company custom Publishing management system development Survey management system Market Res

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions