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VAT hike will lead to price rise: experts

By R Dutta Choudhury

GUWAHATI, July 7 - Though the Assam Government has been claiming that there would be no price rise due to the recent hike in Value Added Tax (VAT), prominent economists and tax consultants are not ready to buy the claim and pointed out that there would be rise in prices due to the Government�s move. The decision of the Government to increase VAT just a few days ahead of the presentation of the State�s Budget in the Assembly is also questioned.

Former vice principal of the Guwahati Commerce College, Ranjit Narayan Deka told The Assam Tribune that the burden of VAT increase would result in price rise and the Government undermined the Budget by increasing VAT on certain items just a few days before the Budget Session of the Assembly.

Deka pointed out that the burden of any indirect tax hike always falls on the consumers and there is bound to be increase of prices due to the recent decision of the Government. �The manufacturers cannot be expected to give up a portion of their profit to bear the burden of the increased tax and the burden will definitely be shifted to the consumers,� he said.

Deka further questioned the logic of increasing tax just a few days before the presentation of the State�s Budget in the Assembly. The Budget is discussed thoroughly in the Assembly and the Government seems to have taken a pre-emptive measure by increasing the taxes before the presentation of the Budget, he added. He further said that the economy of a State is reflected in the Budget and if the Government decides to deal with the financial position in pieces like it did by increasing tax on certain items before the presentation of the Budget, the State�s economy may head towards a bleak future, he warned.

Professor of Economics, Gauhati University, Dr MP Bezbaruah pointed out that there would be rise in prices due to increase of VAT. However, he said that price rise would not be a continuous process. At the same time, he said that if the Government wanted to increase revenue generation for development works, the nominal VAT hike is justified. But if the Government spends money by giving indiscriminate subsidies like the recent move of providing free college admission to students, it will lead to wastage of public money as there have been reports that a substantial number of undeserving students managed to get free admission by taking undue advantage of the Government�s decision, he added.

Tax Bar Association president OP Agarwala said, �I cannot appreciate the Government�s claim that there would be no price rise due to increase of the VAT on more than 300 items under Schedule II.� He said that he was not against nominal increase of VAT if the money is used for the well being of the people of the State. But it would not be correct to say that it would not lead to price rise, he added.

Agarwala also questioned the justification of increasing VAT just a few days ahead of the presentation of the Budget in the State Assembly at a time when the dates for the Budget session have already been announced. He said that the Government should have waited for the placement of the Budget to increase VAT.

Agarwala further revealed that the dealers received the notification of increase of VAT only in the evening of July 4 and no one knows what would happen to tax payment on the items sold in the morning hours of that day.

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