Prices flat after VAT: taxmen

A month after implementation of value added tax, buyers in West Bengal were yet to see any major decline in product prices. Products prices had not risen either, despite warnings from the trading community, officials of the directorate of commercial tax said.

The impact of VAT on product prices till date was marginal, they added.

VAT would start affecting prices that use fresh raw material being purchased by manufacturers this year. This was because the new tax system did not provide input credit on raw materials purchased in the previous fiscal," said officials.

"The new tax system therefore was likely to have its effect in the next three to four months and not now," they added.

DoCT had formed a price monitoring cell to watch product prices and has strengthened its economic intelligence wing.

The monitoring cell would advise the government on fine tuning of VAT rates on products if prices rose appreciably.

"The cell would study reasons behind any price rise and find out if it was linked to VAT and act accordingly," said officers.

Decline in input prices as a result of VAT would have to be passed on by manufacturers through dealers to end consumers and if manufacturers did not pass on the benefit, VAT would not bring down prices, said DoCT officers.

Manufacturers appeared to be reluctant to pass on the benefit of lower input prices but manufacturers were expected to fall in line over time, claimed officers.

Old stock and raw materials prices would come down as products like cement and medicine were now under a tax rate that was lower than those before VAT roll-out.