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India, particularly the trading
community, has believed in accepting and adopting loopholes in any
system administered by the state or the Centre. If a well-administered
system comes in, it will close avenues for traders and businessmen to
evade paying taxes. They will also be compelled to keep proper records
of their sales and purchases.
Many sections hold the view that the trading community has been amongst
the biggest offenders when it comes to evading taxes.
Under the VAT system, no exemptions will be given and a tax will be
levied at each stage of manufacture of a product. At each stage of
value-addition, the tax levied on the inputs can be claimed back from
the tax authorities.
At a macro level, there are two issues, which make the introduction of
VAT critical for India.
Industry watchers say that the VAT system, if enforced properly, forms
part of the fiscal consolidation strategy for the country. It could, in
fact, help address the fiscal deficit problem and the revenues estimated
to be collected could actually mean lowering of the fiscal deficit
burden for the government.
The International Monetary Fund (IMF), in its semi-annual World
Economic Outlook released on April 9, expressed its concern over India's
large fiscal deficit - at 10 per cent of the GDP.
Further any globally accepted tax administrative system, will only help
India integrate better in the World Trade Organisation regime.
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