G. Gurumurthy

Coimbatore, July 24 The implementation of value added tax (VAT) in Tamil Nadu may be smooth. But the mid-term review of revenue collection that has brought forth a negative growth in sales tax collection to the extent of Rs 4 crore for June from Coimbatore sales tax division has startled the Commercial Tax authorities.

The monthly VAT collection from the division comprising the industrial belt of Coimbatore, Nilgiris and Tirupur during June fell to Rs 134 crore as compared to Rs 138 crore for the same period of previous year. This is the first time the region has shown a negative growth in sales tax collection.

The State Commercial Taxes Minister, Mr M. Ubayathullah, presiding over the first ever interactive meet with the trade and industry on VAT implementation held today gave out the tax collection break-up for January-June 2007 for the region (see table).

The meet was held under the aegis of the Indian Chamber of Commerce and Industry, Coimbatore, which was also attended by the Secretary, Department of Commercial Taxes, Mr Devarajan, and the Commissioner, Commercial Taxes, Mr Jacob.

Expressing concern over what he called the huge loss in revenue from the Coimbatore division, the Minister cautioned the trade/industry on short collection of levy saying that the state government took care to implement the VAT rates on consensus basis often by conceding to the trades demand for lowering the taxes in order to achieve greater compliance.

Later talking to newspersons at the sidelines, the Minister said one of the reasons for the revenue drop from Coimbatore was the perceived higher input tax credit claimed under the VAT regime by the manufacturing sector. His department has constituted a committee to scrutinise the sector wise credit claims. The sales tax collection showing an average 20 per cent annual growth would maintain its tempo beyond August and the increase in revenue would reflect in the 2007-08 fiscal.

The Secretary, Commercial Taxes, said next to Chennai, Coimbatore was the largest revenue earner for his department as it accounted for about 10 per cent of the States total sales tax collection of Rs 20,000 crore. This being the first review after the State adopted VAT regime, the Government intended to have similar reviews in other centres including Chennai and Madurai.

Of the 4.22 lakh registered dealers for sales tax in the State, Coimbatore division accounted for about 73,000. Of the estimated tax collection of Rs 19,817 crore from the State last year, Coimbatore accounted for Rs 1,267 crore. The tax collected from Coimbatore trade during April-June this year worked out to Rs 417 crore compared to the entire States Rs 4,262 crore, according to Mr Jacob.

Earlier initiating the interactive meet, the president of the Chamber, Mr D Balasundaram, pointed out that the lower tax collection might be on account of input credit outgo by the manufacturing sector.

But this would reflect in higher revenue from other consuming centres. He also wanted the Commercial Taxes department to institute a system to expeditiously clear tax refunds to exporters.