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BCIC seeks removal of anomalies in VAT laws
February, 22nd 2011

The chambers of commerce have urged chief minister B S Yeddyurappa, who also holds the finance portfolio, to amend certain provisions of the Karnataka Value Added Tax (KVAT) Act to remove the anomalies in its objective of uniform classification of goods and rates to encourage a healthy and competitive business environment.

Pointing out the hardships faced by the industry and business, the Bangalore Chamber of Industry and Commerce (BCIC) in a pre-budget memorandum to the state government said presently, there is no uniformity in respect of VAT laws across states. Each state has its own definitions notifications / schedules / rates of tax / list of goods, resulting in chaos leading to innumerable litigations.

Although, the states had experimented in bringing in uniformity only with respect of rates of taxes (floor rates), this was an absolute failure with each state issuing notifications reducing / exempting taxes in respect of certain commodities.

With regard to the credit facility to capital goods, BCIC said that Section 19(2) of the Karnataka VAT Act should be suitably amended to provide for full VAT credit as against partial rebate if it is used in relation to both taxable and exempt goods akin to Central Excise Rules.

In other words a provision should be made to see that use of capital goods is changed, to be exclusively used in relation to non-taxable transactions like stock transfer outside the state of exempt goods, the credit should be reversed after providing for reasonable depreciation for use.

At a time, when Karnataka government has set its eyes on achieving higher growth with its focus on agriculture and farming sector development in the forthcoming budget, there is a requirement of giving thrust to develop infrastructure required for Food Processing Sector, said Federation of Indian Export Organisations (FIEO) in its pre-Budget memorandum.

The agro industries require policy-related incentives as well as fiscal incentives. Hence, agro-processing companies intending to set up units in Karnataka may be given interest subsidy.

They may also be given a 50 per cent subsidy on the total project cost if they set up processing facilities in interior parts and smaller towns.

FIEO has urged the chief minister to earmark Rs 250 crore in the state Budget for development of agro and food processing industry in Karnataka during the year 2011-12. It has also expressed its willingness to join hands with state government for setting up of an air cargo complex in Mangalore international airport and sought earmarking of Rs 100 crore for infrastructure for export of perishable agro products from Mangalore.

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