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Partners Welcome Delhi High Court Ruling on VAT
September, 20th 2007

Channel associations and partners from across the country have welcomed the Delhi High Court order ruling 4% Value Added Tax (VAT) on select IT products saying a uniformed tax regime will boost the sales and increase the profit margins.

"This will, no doubt, increase the sales of products like - ribbons and cartridges, as in few states VAT was levied at 12.5% for certain products. Following this order, as the prices have become uniform, the partners will not face any problem and this will enable them to generate more revenues from these products," said Annes Khalfay, president of Mumbai-based Trade Association for Information Technology (TAIT).

Sharing similar sentiments, Abhijit Kundu, proprietor of Siliguri-based Bharti Computers said, "The court ruling will have a positive impact on our businesses and the margins will also increase. Being in a small market, earlier we weren't aware of the recent developments, but now as the tax has been lowered the demand for the same will also increase."

The altercation in tax norms in 11 states early this year had left IT partners in the lurch with channel associations across the country complaining against 12.5% VAT for select IT products in these states.

The states of West Bengal, Maharashtra, Delhi, Karnataka, Andhra Pradesh, Haryana, Punjab, Chandigarh, Goa, Jharkhand, and Kerala were all slated to levy VAT at 12.5% for select IT products including software based on the changes in Harmonized System of Nomenclature (HSN).

Giving the much needed breather to the channels, the Delhi High Court earlier this month taking cognizance of arguments of channels, upheld the ruling of the tribunal that had ordered products debated under VAT to be taxed at 4%.

Kamal Bhasin, president of Karnal Computer Dealers' Association in Haryana, said, one of the affected states also welcomed the ruling saying the court order will boost the sales as prices of products like cartridges will go down.

P. N. Prasad, president of Information Technology Traders' Association, Pondicherry said, "The move will have a great impact on partners, as there will be no disputes in filing the IT returns. It'll prove advantageous for partners in general as there will be no difference in VAT charges."

However, skepticism still looms large with a few partners as Deepak Agarwal, proprietor of Agarwal Computer Academy in Udaipur, Rajasthan, said, "This won't help in totality as Central Sales Tax (CST) still exits; this move will only benefit the Delhi market more. But it'll enhance the sale of the select products as VAT has been lowered from 12.5% to 4%."

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