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Punjab announces trade policy, leaves 1.5 lakh traders out of VAT net
Ruchika M Khanna/TNS

Chandigarh, November 14
Punjab today announced its trade policy, which aims at creating an ease of doing business in the state, by reducing government interference to a bare minimum. With the policy’s main emphasis on taxation at the first stage itself, over 1.50 lakh registered Value Added Tax (VAT) dealers across Punjab will no longer be accountable to the taxation department for getting their sale records scrutinised.

The new tax policy for traders, which is aims at wooing urban voters and trade and industry, promises speedy VAT refund, based on the assessee’s credit culture, besides introducing a voluntary disclosure scheme (VDS) for tax defaulters so that they can once again update their records and become regular tax payers. A social security scheme - fire insurance and medical insurance - for small traders having a turnover of less than Rs 1 crore per annum is also a part of the new policy.

The VDS for traders will come into force from January 1, 2014, and dealers can disclose the mistake committed by them and then undertake to deposit the correct tax due along with 1.5 per cent interest from the day the tax was due. The dealers will have to deposit 25 per cent of the due tax initially and pay the balance amount within two months.

Till date, there are 91,889 VAT dealers (of a total of 2.35 lakh VAT dealers in the state) who were not paying any VAT to the state government. Almost 75,000 VAT dealers are paying less than Rs 10,000 per month as VAT. Only 900 VAT dealers in the state are paying more than Rs 1 crore per annum as VAT and their share in the total VAT collection is 97 per cent.

The top 10 companies operating in the state, led by Indian Oil Corporation (IOC), alone contribute over 28 per cent to the state’s total VAT collections in a year. As a result, the small traders were just maintaining the records of sales being scrutinised by the taxation department, without they contributing anything substantial to the state exchequer.

As part of the new policy, the entire VAT will now be paid by the manufacturer of goods (white goods, aerated drinks, FMCG) to the state government before the goods reach the wholesaler, distributor or retailer. The manufacturer will then collect the share of VAT from each of the remaining distribution channels - wholesaler, distributor and retailer. With this, the small distributor and retailer will not have to maintain any records for VAT.

The tax policy for traders also paves way for having a lump sum tax regime for all sectors of trade, rather than an assessment based tax regime. With the emphasis on self declaration for taxation purposes, the Punjab government now wants that like the brick kiln owners, plywood manufacturers and dhaba owners, other industry/ trade sectors should opt for a comprehension package - a lump sum tax to be paid each year.

Policy highlights

• Aims at wooing urban voters and trade and industry
• Promises speedy VAT refund
• A voluntary disclosure scheme (VDS) introduced for tax defaulters.
• A social security scheme introduced for small traders having a turnover of less than Rs 1 crore per annum.