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Journalism of Courage
Regardless of all the problems that appear to be facing the VAT, the very fact that 20 states now come under the new regime is a significant development and one that promises a new and modern taxation system for India. After failing to meet at least five similar deadlines, the empowered committee on state VAT, chaired by Bengal Finance Minister Asim Dasgupta, has taken the correct and courageous decision to press ahead this time. On earlier occasions, the decision to implement VAT had been postponed due to a lack of preparation on the part of the administration or the inability to get all states together to agree to a harmonised system. Today, despite major and minor snags and glitches, and despite the BJP states taking the retrogressive stand of opting out of the regime, VAT has come into force in a major part of India.
Inadequate preparation for VAT may still, however, come as a constraint to the smooth implementation of the system. Take, for instance, the differences in the rates. The two rates of 4 and 12.5 per cent mean that in many cases there may still be an incentive to evade taxes and stay out of the VAT net. This might defeat the objective of increasing the public compliance that is expected to come with the VAT. Also, there seems to be a lack of harmony between the lists that the different states are proposing. This, again, could lead to difficulties which may become visible over the next few weeks as tax returns are filed. It is important that the states that have been brave enough to implement the VAT, address these problems and solve them as soon as possible.
