Introduce VAT, CII tells Raje

The Confederation of Indian Industry (CII) has called for early introduction of the value-added tax (VAT) in Rajasthan and drafting of a new industrial policy to attract investment.

In a pre-Budget memorandum, the chamber has also stressed the need for steps to control the revenue deficit and to improve the state's fiscal health.

According to the chamber the VAT should be introduced as early as possible to plug tax leaks and boost the state's revenues.

For instance, Haryana, the only state that shifted to the VAT regime, had reported an impressive 20 per cent increase in VAT collections during the last fiscal, the chamber said.

Prior to the changeover to the VAT, the state had been reporting an average annual increase of around 12 per cent, it added.

In the first two months of the current fiscal, Haryana has reported a whopping 38.39 per cent jump in the VAT collection.

The chamber says post-VAT, all tax-based and other fiscal incentives (deferrals and exemptions ) need to be phased out. There is a need to rationalise user charges as well for improving the revenue collections.

Commenting on the fiscal situation of Rajasthan, the memorandum says increasing the debt burden is a concern. Growth rate of debt at 15.3 per cent from 2000 to 2003 exceeds the 11.30 per cent growth rate of revenue receipts during the same period.

If the current trends continue, debt-servicing costs would claim an even greater share of revenue receipts, leaving that much less for the development expenditures. There is a need to re-prioritise expenditure so that greater money is allocated towards creation of capital assets that enhance social and economic infrastructure.

To increase competitiveness of industry, the paper says the entry tax on fuels and lubricants should be withdrawn.

Sales tax on marble slabs and tiles should be reduced from 12 per cent to 8 per cent. The luxury tax on cigarettes should be reduced and entry tax eliminated.

Issuance of sales tax forms 18A, 18C, and other declaration forms, should not be correlated with pendency of sales tax demands. Sales tax deposit should be required on a monthly basis. The state should also bring down the stamp duty rate to 4 per cent, besides reducing the number of specific duty rates.

To facilitate a conducive environment for industrial growth, it recommends the elimination of inspector raj.

To that effect, a common and transparent inspection should be carried under all pollution and labour laws, once a year as per an advanced schedule and with prior intimation.

There should also be self-certification in factory and labour laws for all industries, except major hazardous industries.

The single-window system should not only ensure initial approvals to set up the project, but also look into the requirements of obtaining further licences necessary to commence production.

The system should also provide the facility to the investor in obtaining all the necessary state-related approvals from the concerned departments.