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VAT amendment sparks off cold war between SAD, BJP

The nine-month old amendment by the Punjab cabinet in value added tax (VAT) aimed at plugging tax evasion by registered traders has sparked off a cold war between the ruling Akali Dal and its ‘trader-friendly’ alliance partner, the BJP.
By Pawan Sharma | Hindustan Times, Chandigarh
UPDATED ON JUL 29, 2014 11:09 AM IST

The nine-month old amendment by the Punjab cabinet in value added tax (VAT) aimed at plugging tax evasion by registered traders has sparked off a cold war between the ruling Akali Dal and its ‘trader-friendly’ alliance partner, the BJP.

According to government records, there are 1.44 lakh registered traders who pay “zero” tax while there are many who have been getting away by paying less tax. Punjab has 2.49 lakh registered traders and 1.86 lakh traders show a turnover of less than Rs 1 crore. Of the total registered traders, 2.17 lakh paid tax less than Rs 1 lakh per annum in 2013-14. Only 1,063 traders pay more than Rs 1 crore tax per annum -- 85% of the total VAT collection of Punjab.

Thus, at the root of this tussle between the SAD and BJP is the fear of tax-evading traders that they will sooner or later fall into the VAT net widened by the excise and taxation department headed by deputy chief minister Sukhbir Singh Badal, government sources say. The VAT amendment done in October last came into force from April and the traders had to submit returns in July of their business in the first quarter which ended on June 30. Hence, this hullabaloo now!

POSTURING IN PUBLIC

The dispute, earlier confined to behind-the-door parleys, was bounced in the public by local bodies minister Anil Joshi (BJP) last Thursday after he gave an ultimatum to the state government saying he would lead an agitation with traders if the government failed to withdraw the tax by Monday.

Meanwhile, a few other BJP leaders such as Som Parkash shot off letters to the government after former cabinet minister Manoranjan Kalia (BJP) apprised deputy chief minister Sukhbir Singh Badal of the “concerns” of the BJP and the traders.

In October 2013, the cabinet in which BJP ministers were present had given nod to amend section 13 (1) of Punjab VAT Act, 2005. It provided that “input tax credit (ITC) would not be available as ITC unless such goods were sold within the state…”

When contacted, BJP minister Joshi said, “The government has extended the deadline of filing returns till August 15 while also giving liberty to traders to file returns as per previous practice. That is why I will not launch agitation against the government.”

MODUS OPERANDI

In January, an inspection was conducted at Dera Bassi. The trader dealt in commercial vehicles and showed a stock of over Rs 3 crore. “We inspected the premises and found just three vehicles worth Rs 75 lakh and spare parts worth Rs 70 lakh. This dealer was fraudulently using the ITC on purchases and was not paying tax to the government as his VAT liability was being adjusted with ITC on stock in the books. The trader was imposed Rs 45 lakh tax and it was recovered,” said an officer.

The easiest way to escape paying tax is to get bogus ITC by showing rise in stocks on papers.

“Hence, dealers procure bogus bills carrying ITC and avoid payment of tax,” an official said.

Earlier, the excise and taxation department had also found that many dealers were floating bogus firms while making huge transactions from outside Punjab without paying any tax. To curb this tax evasion, the Punjab government had imposed entry tax on certain items.

The excise and taxation department had also found that certain unscrupulous dealers were indulging in benami transactions by floating firms in the name of someone else. In such benami cases, by the time the assessment was framed, the dealers who imported the goods were not available on the given address, said an officer.

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