The Bangalore Chamber of Industry and Commerce (BCIC) has urged Karnataka government to simplify the tax administration in the state to usher in a strong and vibrant industrial atmosphere. Presently, the prevalence of different tax systems like the entry tax, input tax, CST and VAT among others have complicated the conduct of business by entrepreneurs and led to industrial chaos.
In a pre-budget memorandum submitted to state chief minister and finance minister B S Yeddyurappa, the BCIC has urged for a tax regime that is transparent, simple and broad-based resulting in better tax adherence and compliance.
K R Girish, president, BCIC said, “Presently there is no uniformity with respect to VAT laws across states which have their own definitions, notifications, schedules, rates of tax and list of goods among others resulting in innumerable litigations. There should be no disparity in respect of branded or unbranded, man-made or machine made, packed or unpacked, etc and uniform exemptions or reduction in tax rates across states”.
A number of commodities are classified as inputs or capital goods and not consonance with the HSN (Harmonised System of Nomenclature) classification under Central Excise laws. HSN is an 8-digit code based on the classification of goods for VAT purpose. This should be re-looked into to remove the anomaly and make suitable amendments, he said.
“We assert that the continuance of CST (Central Sales Tax) and VAT (Value Added Tax) cannot go hand-in-hand and CST has to therefore be abolished. The abolition of CST under the VAT regime will lead to free movement of goods in the course of inter-state trade or commerce. It will curtail cascading effect of taxes and reduce tax induced distortion on account of vertical/horizontal integration. It will give way to introduction of VAT in its pure form, decreases incentive for evasion of taxes due to its self-policing nature and generates large and buoyant revenues due to levy of tax on value addition at each stage.
It will reduce a lot of paper work like issue and receipt of forms. The invoice itself can act as a document for claiming rebate/proof of inter-state purchase, etc, ensuring smooth and speedy administration.
The abolition will result in higher compliance, as trade and industry will not look at tax planning avenues.
Such as branch/stock transfers and consignment sales. This will ensure buoyancy in revenue, he said.
The BCIC has also urged the government for abolition of entry tax. The Entry Act has been the most litigated Act and the industry has been crying for abolition of this Act, which is complicated, confusing and highly litigated. The cost of administering this Act, the revenue generation, practical problems etc has been discussed by industry and trade and has recommended abolition of this Act. It is recommended to make budgetary allocations to local bodies, which will not in any way not going to result loss of revenues to the government, the chamber said.