Implement VAT or get isolated: Assocham to UP, TN

New Delhi, Apr 3: A day after Uttar Pradesh Chief Minister Mulayam Singh Yadav refused to implement Value Added Tax (VAT) in the state, ASSOCHAM today asked him to change his mind so that the last hurdle towards integrating India into a common market is removed.

The chamber also appealed to Tamil Nadu Chief Minister J Jayalalitha to implement VAT in the state.

The new tax regime is in force almost throughout the country, with five BJP-ruled States - Rajasthan, Gujarat, Madhya Pradesh, Chhattisgarh and Jharkhand - switching over to the new tax regime from Saturday.

Welcoming the decision of these states, ASSOCHAM President Anil K Agarwal said that it is imperative that UP and Tamil Nadu also join the other states and make the country a unified market.

''The non-implementation of VAT would lead to undesirable diversion of trade and business from Tamil Nadu and Uttar Pradesh to the neighbouring states,'' Mr Agarwal said.

This situation, he said, would lead to unhealthy competition and create a lot of confusion for trade and commerce.

Mr Yadav, yesterday said the introduction of VAT would lead to a reduction in revenue.

The initial trend in revenue collections in the VAT-implemented states has been very encouraging, despite teething troubles. During the first seven months of implementation of VAT (April-October 2005), the total revenue of these five states registered an increase of 14.4 per cent which is higher than their compound annual growth rate (CAGR) for the last 5 years.

Despite the initial transitional problems, the implementation of VAT in 25 states and union territories from April 1, 2005 has been rather smooth and the results are encouraging.

''The best thing about VAT is that the benefits due to the input tax credit and reduction in tax rates are passed on to the consumers,'' Mr Agarwal said.

In separate letters to UP Chief Minister Mulayam Singh Yadav and Tamil Nadu Chief Minister J Jayalalitha, the ASSOCHAM President said that the apex Chamber is also urging the Centre to speed up pending reforms in the central sales tax so that the country moves forward and VAT is implemented in all states.

UNI