DNA : Sales Tax -  Vat raids on the anvil : Aug 4, 2007

 vat raids on the anvil
 sales tax department will set up a commercial intelligence unit to identify
 those who might be escaping the vat net
 seemaa kamdar

Till now, the much-dreaded 'raid' implied an income-tax swoop. but soon,
you could have vat raids too as the sales tax department is gearing up to crack
 down on those who default on their vat.

Highly placed sources say that as part of a major restructuring exercise,
 the department, which accounts for 70 per cent of state revenues, will set
 up a commercial intelligence unit specifically for the purpose of identifying all those who might be escaping the vat net. the thrust of the mammoth reorganisation is to further hike its collection and service high-end vat payers, it is learnt.

Following the state cabinet's in-principle approval of restructuring and the advice of consultants pricewaterhousecoopers (pwc), the sales tax department is in for a major overhaul. "the structure we currently have in place was designed for the collection of sales tax. with the coming of vat from april 1, 2005, we need a different system,'' observes a finance department official.

While sales tax system had a greater thrust on assessment and had  practically nil refund applicants, the refund mechanism is overburdened in the vat regime as input credits are claimed for each sale. sales tax work was formerly handled by wards but as vat is about self-assessment, a subtle  transfer of power from the wards to the headquarters is expected, he said. apart from a new physical structure, the revamp aims to tighten the screws  on vat diligence and plug the leaks. for this purpose, the enforcement
 branch is being reactivated. "it will be responsible for conducting surprise  raids on suspect firms,'' says a senior official. a commercial intelligence unit will give data to the enforcement unit and to the survey branch whichwill be created specifically to identify those who have skipped registering for vat.

 it is learnt that import firms and firms that don't issue receipts will be
 on the vat radar. raids have been kept in abeyance for the past 18 months
or
 so for some reason or the other. now, we hope it will create a deterrent
 effect,'' says an official. however, unlike the income-tax department,
which has the powers to confiscate assets as well, the vat department can only
 seize documents, he said. vat's brilliant performance over the past two years has got finance department enthusiasts asking for more. in 2003-04 and 2004-05, the state
 earned sales tax of rs13,218.6 crore and rs17,023.12 crore respectively.
 after vat, the earnings grew to rs 18,932.57 crore and rs23126.98 crore in
 2005-06 and 2006-07 respectively.

 Publication : DNA; Section : Mumbai; Pg : 7; Date : 4/8/07
 URL :
 http://digital.dnaindia.com/epapermain.aspx?edorsup=Sup&queryed=7&querypage=7&boxid=31027810&parentid=45478&eddate=08/04/2007