VAT a show: State tax mopup doubles

KOLKATA: Most states, which used to record a growth of around 14% in tax revenues prior to implementation of VAT, have nearly doubled tax collections.

The empowered committee of state finance ministers is working to plug loopholes to further shore up tax collections, said the committee chairman and West Bengal finance minister Asim Dasgupta.

Speaking at a seminar organised by the Institute of Chartered Accountants of India (ICAI) here on Friday, Mr Dasgupta said since the introduction of VAT on April 1, 2005, states have progressively seen an improvement in their tax revenue collections. “The states are seeing nearly 24-30% growth in their tax revenue collections,” he said.

The empowered committee also proposes to tone up the VAT system to minimise revenue leakages. It has already identified the growing tribe of missing dealers. “Some dealers are registering themselves and claiming an input tax credit. But once they receive the credit, they vanish. We have to deal with these missing dealers, which is a big problem in several other countries such as the UK,” said Mr Dasgupta.

The entire system of VAT collections and returns has been computerised to solve such problems to a large extent. “We are ensuring that there are sufficient internal checks at every point with proper forward and backward linkages,” Mr Dasgupta said.

The empowered committee chairman said Uttar Pradesh, the only state without a VAT system, is also in the process of implementing the tax regime. “Uttar Pradesh has recently prepared the VAT Bill and sent it for Presidential assent,” he said.

Mr Dasgupta said West Bengal is planning to further streamline its internal audit system. “We were the first state to have an internal audit wing in the finance department, which is co-ordinating with other departments. We want to work with ICAI to further improve our internal audit system,” the minister said.