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Provisions of the Sales Tax in Tamil Nadu
from: In India, the provision of the sales tax in Tamil Nadu includes many different amounts based upon the product in question. Although the sales tax in Tamil Nadu has been in effect for many years, they have chosen to begin charging VAT effective on January 1, 2007. This change was announced at the annual budget meeting in July, 2006 and includes other changes to the sales tax n Tamil Nadu as follows:• Pulses and oil will be exempt from sales tax
• A reduction in the sales tax on tea to 1 per cent from the current 4 per cent
• A reduction in the central sales tax in Tamil Nadu on tea that is sold in the auction centers from 2 per cent to 1 percent.
• In the tea auction centers of Coimbatore and Coonoor, the general sales tax will be reduced to 4 per cent from 8 percent and the central sales tax to 2 per cent from 4 per cent. Any additional tax and surcharge at these auctions are also exempted on sales at these centers.
• Hank Yarn is exempted from sales tax in Tamil Nadu
• Fly ash is exempt from sales tax when purchased by brick manufacturers.
• Licensed Tamil software is exempt from sales tax
• Gum Benzoin is exempt from sales tax
It appears from some of the provisions that Tamil Nadu is attempting to reduce the cost of goods by lowering the sales tax, but on the other hand, they are eliminating the sales tax to join other countries by imposing a Value Added Tax (VAT). Information available does not indicate if the VAT replaces the sales tax or is in addition to the sales tax. If it to replace the sales tax, the move may be good if it is a reduction in the final price of goods, but that depends on the amount. In many cases, VAT is actually a higher tax than sales tax, so it may not be a good move for consumers.
If Tamil Nadu is adding a VAT to the cost of the goods that merchants sell, it is likely to cause a decrease in sales as consumers will no longer be able to afford the price of goods with an additional tax. Certainly, they will buy things they must have, but they will decrease how many luxury items they buy when faced with the potential of paying an additional tax on those goods. It may not affect the wealthy, but the wealthy only comprise a portion of the population.
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