__p This is one April Fool’s Day that will be taken very seriously. The government’s directive that VAT (Value-Added Tax) will be implemented with effect from April 1, 2005 has got everybody’s attention. Industry associations, irrespective of the verticals it represents, are working overtime to understand the implementation process of this much-talked-about tax structure and how it will impact the business of its members.
p____p And it’s no different in the IT industry as well. To help partners understand the nitty-gritty of VAT, the next issue of 360 Magazine has a cover feature on VAT, with focused articles from the distributors’ perspective, the partners’ concerns and the product categories that will be most affected by the new duty structure, and what needs to be done on the infrastructure side to ensure the smooth implementation of a tax that has been called the ‘Mata Hari of the Tax World’.
p____p But will VAT really add value to your business? The obvious answer is yes it will. What is still not clear is how exactly will the new tax structure work. While government advisors and tax consultants are still working out the finer details, the one important fact is that in one clean strike, VAT will send gray market operators running for cover. This is because partners will only get credit depending on the number of products they actually sell and the value they add to that product. And the receipts they can produce for those products.
p____p VAT will also make distributors happy, as all states will have a uniform tax structure. It will ensure smooth transferring of goods because even for stock transfer/consignment sale of goods out of the state, input tax paid in excess of 4 percent will be eligible for VAT credit.
p____p Where things could go wrong is in its execution. VAT calls for partners to assess themselves. Each product category will come under a different tax slab depending on how it is classified. For example, lifestyle products have a higher taxation rate. Also in this system, partners have to assess themselves.
p____p So the eventual success of VAT will rest on your shoulders, dear partners.p__