VAT's the right choice?

LUCKNOW: Call it ‘VAT on a hot TIN spoof'', UP''s political quagmire has rendered a new meaning to progress and development. So, Uttam Pradesh might still be a caste hotbed and the pot-holed road to development might encounter hurdles. Very much like what happened in case of value added tax.
While traders shifted loyalties for a single-point demand — No VAT — it is the industrialists who would be scoffing at the government''s decision.
Chief minister Mulayam Singh Yadav had promised traders he would not implement VAT in the state if they assured him of their support in Lok Sabha elections. This they apparently did. True to his promise, Yadav took the stand not to implement VAT.
While it is widely acknowledged and economists, bureaucrats and industrialists, each has termed VAT a political issue rather than a decision based on a thorough study, it is only the politician who denies the obvious.
"It is impossible for small traders to keep an account of their sale. There is so much of unemployment in the state that a maximum of people are forced to earn their livelihood from small shops," said minister for food and civil supplies Ashok Bajpai, who represented UP for a meeting of state finance ministers with Union finance minister P Chidambaram on June 18. "Obviously one cannot expect these small shopkeepers to keep computers for accounting," he added. He mentioned that while only 15 per cent of shopkeepers were registered, the rest made use of the compounding facility. Under the VAT regime, all these traders would have to get themselves registered, he said.
Then, he said, there were several steps involved in sale. At each step the trader would have to pay the tax, of which the already paid tax would be refunded. This would unnecessarily block money which these small traders did not have.
Also, Bajpai stressed that UP cannot conform to the uniform floor rate. Then, different states were given varying packages by the Centre — what about UP? Here, the traders had to cope with cess, mandi tax, toll tax and the panchayats too levied a separate tax.
The decision was taken primarily because the number of small traders is more in the state and manufacturers are less in number.
The writing on the wall is though bold and clear. It is unmindful of the benefits implementing VAT would accrue in the long run in terms of an increase in revenue and a transparent trading environment that the state government has split wide open its insecurity.
While director planning and development Lucknow University Arvind Mohan stressed that the industry was welcoming VAT and state head Confederation of Indian Industries (CII) Gyan Prakash confirmed, a senior bureaucrat, on condition of anonymity, said it was more of a political decision. Also that "the government could not afford not to implement it — basically it is the mind set which is not changing — the government must reconsider its stand, study the process and convince traders also to welcome it since it would be favourable for the economy."