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Introduction
It gives me immense pleasure to address this All India Conference on the subject of Value Added Tax. The era of liberalization that was ushed in the early !"s through the introduction of economic reforms is perhaps the most significant event in the economic history of India. In the last #$ years% we have ta&en giant strides in intergrating our economy with the 'ew International (conomic order. The unification of our mar&ets with the international mar&ets has created tremendous opportunities for Indian industry and paid rich economic dividends to the nation. Today% there seems no dispute that India will soon emerge as a major international econmic power and join the league of the world"s most developed nations. It does seem that the introduction of VAT would have positive ramifications for our economic growth and national development. The success of VAT is well recognized from the fact that more than #)! countries around the world follow this system. *ntil recently% it was only the *nited +tates and India amongst the more populous countries that did not follow VAT. ,owever% this has now changed and India has reformed its tax regime. -ight at the outset% however% we must note that for the successful implementation of VAT% it is important that there be constant dialogue between all the sta&eholders regarding issues related to VAT and its implementation. This includes legal and tax professionals% companies% traders% consumers and the +tate governments. I am confident% that forums such as this would go a long a way in generating that dialogue. In
this regard% we must commend the efforts of the +ales Tax .ar Association% its office/ bearers and members for ta&ing such an initiative.
White Paper on State Level VAT, Empowered Committee of State Finance Ministers, an!ar" 1#, $%%&' www'wi(ipedia'com
harmonization of the taxation system through intiatives li&e VAT is a crucial step in the unification of domestic mar&ets. I am confident that even in India% VAT will play an important role in the intergration of the domestic mar&et and boost inter/state trade and commerce.
prevents tax evasion and boosts revenues to help cash starved governments to come out of their debt/trap.) It is because of these benefits that VAT has been adopted in every region of the world% and by so many different &inds of nations. The system was initiated first in .razil mid # 8!"s while (urope adopted the system in # 9!"s. In Asia% a large number of countries including our neighboring countries li&e China and +ri :an&a have been following this system for a number of years. 6e too have modified our tax regime to the VAT model and it seems that the experience so far by those states which have adopted VAT has been very positive. If is seen that in states where VAT has been implemented there has been a substantial increase in the tax revenues of the government. There has been an increase of 3!; of revenues in 3!!)/!< = )!; increase in 3!!</!$< in ,aryana% 5elhi has seen 3 ; rise in tax collection under VAT$. +everal other states have also reported
significant increase in tax revenues after the introduction of the new system. In the years to come% it seems% VAT may provide greater revenue to the +tate governments.
Pradeep *inodia, +ntrod!ctor" Speech F+CC+ Conference on VAT, +ss!es and Concerns , A!-!st )1, $%%&, .ew *elhi / Economic Times, 0 Fe1, $%%&' & Economic Times, $% A!-, $%%&'
reparedness for !tate VAT ? There is a manifest need for public awareness amongst the general populace. @oint Arogramme should be underta&en by all sta&eholders to disseminate information about VAT and its benefits. "niformit# of definitions ? A conscious and earnest attempt needs to be made by all state governments to ensure uniformity of all +tate legislations% procedures and documentation relating to VAT. This would ensure greater harmonization between the taxation regimes of different states% eliminate unhealthy competition and lead to the integration of the domestic mar&et. Compensation to !tates ? The issue of compensation is possibly the most controversial and problematic point of contention in debate surrounding VAT. It must be tac&led through mutually acceptable mechanisms. "nification of all local taxes ? The introduction of VAT should be supplemented by rationalization of the overall tax structure. Credit on Inter$state transactions ? The recommendation of the tas& force that needs to be effectively considered is the grant of credit of duty by the importing +tate for the duty paid in the exporting +tate% in the course of inter/+tate movement of goods. The implementation of this measure would ensure smooth inter/state trade and benefit the economy. !tabilit# and continuit# of the VAT regime ? Another aspect is step about the creation of a VAT Council. The (mpowered Committee of +tate 2inance 7inisters has done good wor& in the implementation of VAT. A permanent suitable committee should be considered and may be vested with adeBuate powers to ta&e steps against
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discriminatory taxes and practices and eliminate barriers to free flow of trade and commerce across the country.8
Concluding %emarks
I would conclude by hoping that critical issues in the implementation of the VAT system would be addressed soon. 6ith this% I congratulate the +ales Tax .ar
Association% for organizing this conference. I am sure that the discussion in the coming two days would be highly productive and enlightening for all the participants.