VAT will lower prices

"The retail price of products will fall within six months of implementation of VAT and replacement of existing multiple taxes by an integrated national VAT would improve the Tax-GDP ratio by two per cent," Assocham president M K Sanghi said, unveiling a blueprint for VAT implementation.

In the current money term, the two per cent rise would be Rs 60,000 crore (Rs 600 billion), but "Assocham believes it could go up to Rs 75,000 crore if adequate awareness is created", Sanghi said.

On government's stand that Central Sales Tax will be phased out in due course, Sanghi said the Centre should come out with a timeframe in which CST will be phased out.

The crisis over VAT: Complete coverage

The chamber suggested phasing out of CST and extension of state VAT to additional excise duty products like sugar, textiles and tobacco which are not covered by VAT from April 1 this year.

Local or state level taxes like octroi, entry tax, lease tax, works contract tax, entratainment tax and luxury tax, should be integrated into the new tax regime, it said.

In Assocham's view uniformity in documentation and removal of various non-tax barriers like goods permits and transport documents introduced in different states is vital for success of VAT.

To a query on the proposed Tsunami tax, he said it was a matter of concern, and the chamber will take up the matter with the Finance Minister P Chidambaram.