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Raja Chelliah favours value added tax

Public finance expert Dr Raja Chelliah favoured introduction of value added tax in the capital and the states as it would ensure greater efficiency as well as export competitiveness.

Addressing a seminar on VAT, organised by the sales tax department in New Delhi on August 3, Dr Chelliah said VAT is a neutral tax because it causes least distortion in the allocation of resources. This is because it minimises unintended interferences in the economic decision of the producers -- decision regarding what to produce, how much to produce and how to produce.

Dr Chelliah -- chairman of the National Institute of Public Finance and Policy who headed the finance ministry's tax reforms committee which recommended far-reaching changes in the tax structure -- said ordinarily these decisions should be taken on economic grounds and not with a view to saving taxes.

The eminent economist gave a number of reasons which ensure the efficacy of the Act.

Dr Chelliah said applying VAT principle in inter-state sales would reduce the tax burden on consumers.

The seminar, chaired by Delhi Finance Minister Jagdish Mukhi, was attended by sales tax commissioner Sanat Kaul, advisory board members, sales tax officials, advocates, representatives from dealers associations and chartered accountants.

Mukhi said the very structure of VAT reduced the chances of avoidance or evasion of tax.

UNI