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VAT way have tax concessions helped public
May, 01st 2010

AIADMK on Friday virtually cornered the ruling party on issues like implementation of Value Added Tax (VAT), spiralling prices of essential commodities, scrapping of Central Sales Tax and tax concessions extended to many goods, etc.

Initiating the discussion on the demands for grants for Commercial Taxes Department in the Assembly, Shanmugam said the DMK government had introduced the VAT in Tamil Nadu claiming that the measure was aimed at bringing down the prices of essential commodities and to boost the revenue growth.

But the step proved counter-productive - the prices spiralled while the revenue growth had come down.

The Central government had assured Tamil Nadu to compensate the losses incurred through the introduction of the VAT. But the total loss so far in terms of VAT stood at Rs.4,011 crore. Of this, the Centre had only reimbursed only Rs.3,050 crore.

Similarly, the Centre had not kept its promise for cent per cent compensation for scrapping the Central Sales Tax in phases. The losses incurred due to this move was Rs.2,695 crore. But the Centre had only paid Rs.1,147 crore. Apart from this, the State had demanded Rs.1,500 crore as compensation till January 2009.

Shanmugam also contested another reason put forth for the introduction of the VAT that it would enhance the revenue collection of the State. During the AIADMK regime, the revenue growth was marked by around 20 per cent per year, that was, Rs.3,000 crore per year.

But after the DMK assumed office, revenue growth came down to 15 per cent in 2006 and the next year, it stooped to just three per cent.

In the current year, it was just nine per cent. Just because, VAT was implemented in a hurry, now the State was incurring losses.

Dismissing yet another claim that the VAT would bring down the prices of essential commodities if similar tax pattern was prevailing throughout the country, Shanmugam said a comparison of prices of essential commodities in 2006 and after four years of VAT regime in Tamil Nadu would prove that this claim was totally false.

The DMK government had given tax concessions to 59 articles this year and till last year, VAT was brought down from 12 per cent to four per cent for 30 goods.

Can you prove that the prices of all these commodities have come down after tax concessions? In fact, prices of these commodities have increased manifold.

Tax concessions are given with a view to bring down prices and in turn, the consumers should benefit from the measure.

But now, the benefit goes to owners of companies and not consumers, Shanmugam observed.

Intervening, Finance Minister K Anbazhagan said prices of goods would have spiralled further if tax concessions were not extended. Further concessions were given as a moral support to bring down the prices. In fact, the price rise was a direct impact of inflation. When the salary for the government employees and workers goes up, it was quiet natural that the prices would also go up. Price rise was a global phenomena.

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