Govt. to amend Sales Tax Act

By Our Special Correspondent

CHENNAI, JULY 8. The State Government has decided to amend the Tamil Nadu General Sales Tax Act (TNGSTA) to remove the problems faced by those who deduct tax at source from payments made to contractors, according to Mr P. C. Cyriac, Principal Commissioner and Secretary of Commercial Taxes.

As per the provisions introduced in June 1999, sales tax deduction at source (TDS) at two per cent in the case of civil works contracts and four per cent in the case of other contracts exceeding Rs 1 lakh in value should be remitted in the commercial tax office under whose jurisdiction the contractor falls, irrespective of where the customer effecting TDS is located. In case the contractor is not registered, the customer would have to remit the TDS amount in the office under whose jurisdiction the former ought to have got himself registered.

The Government has now decided to amend the Act to enable the tax deductors to remit the amount in the CTOs in their own areas, on the model of the TDS under income-tax, Mr. Cyriac said.

Addressing the valedictory session on Saturday of a two-day workshop on sales tax, organised by the All India Tax Payers Association (AITPA), Mr. Cyriac also indicated that the Government would grant relief to private milk producers who have been slapped with tax claims on reconstituted/recombined milk supplied by them before April 1, 2000.

(The `milk muddle', as trade circles call it, arose when the Commercial Taxes Department started levying tax on milk produced by Aavin as also private dairies last year in the wake of an audit objection on grant of ST exemption on the ground that it was not the same as `milk' as mentioned in the relevant schedule to the TNGST Act. Following a public pronouncement by the Chief Minister, Mr M. Karunanidhi, last year against taxing milk, the Government in this year's budget changed the nomenclature to `pasteurised milk', eligible to tax relief, with effect from April 1, 2000).

Mr. Cyriac said the Government had subsequently notified relief to Aavin alone for past (pre-April 2000) tax defaults in view of the fact that Aavin was under obligations like payment of a minimum price to milk suppliers and keeping consumer prices under check, which were not binding on private producers. Though the Commercial Taxes Department favoured similar relief for private producers, their case had been weakened by their own `marketing hype', by way of advertisements which falsely described the milk sold by them as having extraordinary ingredients different from Aavin-type milk, he remarked.

``I am confident that my department can convince the Finance Department to grant the relief to private producers also'', Mr. Cyriac said, adding that the question remained whether the relief should be given by way of an exemption with retrospective effect or as waiver of tax due but not paid. Waiver would warrant needless procedures by way of determining the turnover and the tax due, Mr. Cyriac said.

Pointing to several liberal measures adopted by the department, including raising the self-assessment ceiling to Rs 1 crore in this year's budget (with 20 per cent of the returns being subject to scrutiny), grant of registration without prior inspection and five-year validity for registrations, he said the Government would feel justified in placing such trust in assessees only if the latter reciprocated by way of integrity and transparency resulting in a sharp rise in the tax revenue.

The Secretary said the Government had recently notified another relief, reducing the deposit amount in first appeals to 12.5 per cent from 25 per cent, and added that demands for reducing the 100 per cent deposit requirement for second appeals would be given due consideration.

Mr. K. J. Chandran, consultant, who coordinated the workshop, said there seemed to be inadequate appreciation in various circles concerned about the ``radical change'' that the Supreme Court's decision of May 2000 had brought about in interpreting the taxability of lease transactions and on which State involved in inter-State transactions of such nature would be eligible to tax them.

Mr. Ashok Kumbhat called for a review of the Supreme Court ruling validating the levy of additional sales tax (turnover tax) in view of the controversies surrounding the tax as one on capital and the fact that the apex court ruling had been rendered during the Emergency when the then powers-that-be had called for a ``committed judiciary''.

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