New turnover cap to exempt 90% traders from VAT

NEW DELHI: The decision of the empowered committee on VAT to raise the turnover limit for traders to opt out of VAT — from Rs 25 lakh to Rs 40 lakh — will allow 90% of the traders to opt out of the new taxation regime. But the new limit will cover over 80% of the wholesale dealers and those who deal in high-value commodities like tyres, cement, consumer durables, metals, chemicals and paper. Majority of dealers in metal, paper, furniture and chemicals act as wholesalers and stockists to sub-dealers and small dealers. The new exemption will at most affect the latter.
Sources in the local trading community say that the new limit will take some sting out of the anti-VAT lobby. Though VAT is being opposed in the name of small traders and shopkeepers, the people leading anti-VAT agitation are the “fat cats� in the retail and wholesale trade, they added. Said a tyre dealer,
“All the office bearers in various trade associations like New Delhi Traders Association and Chandani Chowk Traders Association are big showroom owners having annual turnover running into crores.�
This is echoed by the manufactures. Said CEO of a tyre company, “Small dealers have nothing to loose. They are open to becoming a sub-dealer or retailer. Opposition is from large dealers who perceive VAT as a tax on their profits.� In tyre trade for example, over 90% of the dealers have monthly turnover between Rs 3 lakh and Rs 8 lakh. Says a tyre dealer in Delhi, “In our trade annual turnover usually run in crores. So the new limit doesn’t affect us at all.�
The situation is similar for the dealers of consumer durables. “A turnover of Rs 40 lakh is nothing in our trade. The new limit will only exclude very small retailers and sub-dealers in smaller towns,� said a dealer in Delhi.
In case of cement as well, the new limit will only exclude sub-dealers and small time retailers in smaller towns and localities. Says a senior official of Gujarat Ambuja, “A typical dealers sells upwards of 10,000 bags a month. At an average price of Rs 125 per bag, monthly turnover works out to Rs 12.5 lakh.�