Kerala Govt. urged to roll back VAT on MRP on packaged goods

Kochi, Apr 20 (UNI) The Cochin Chamber of Commerce and Industry today urged the Kerala Government to roll back its recent decision to impose VAT on the maximum retail price (MRP) of packaged goods, saying the decision would have ''a series of disturbing fallouts''.

Addressing a press conference here, chamber president Jose Dominic said that the proposal, contained in the State Finance Bill for 2007, was against a Supreme Court judgement, which had last year held that tax on the first point of sale based on MRP was legally unsustainable for any commodity.

The supreme court had given this ruling while striking down a Rajasthan government decision to impose VAT on MRP, Mr Dominic said.

Stating that this measure would erode the benefits of a modern, uniform tax system such as VAT, Mr Dominic said ''this will take us back to the stone age.'' The state would end up losing as this would affects its investment and business prospects, he added.

Claiming that the government decision did not make sound economic sense for the state, Mr Dominic said that trade prices for most goods in Kerala would become higher as compared to prices in neighbouring states and would result in lower margins for the trade or alternatively, a higher MRP for Kerala alone.

''In either case, this will open the floodgates to illegal inter-state movement of goods, which will have an adverse impact on the state's tax collections,'' he added.

Chamber vice-president Satheesh Murti said that with the manufacturers of certain commodities, such as cigarettes, already indicating that they would not exercise the VAT on MRP option, trade associations had begun to use ''strong-arm tactics'' to dissuade the sale of such products.

''This is escalating into a major law and order issue within the state with reports coming in of threats being issued to the members of the trade who want to carry on their business,'' he added.

While the government was trying to introduce this measure as a ''presumptive tax'' to plug leakage of tax, it would result in a fall of revenue for the state, he said. While hurting the interests of the small and marginal retailers, the measure would enable traders, who were hitherto registered under VAT, to come out of VAT scrutiny and also evade other taxes.

''In any case, consumers would be the worst sufferers as they would either have to pay higher prices, face shortage of goods or buy these from illegal inter-state channels,'' he added.

UNI