WORKING OF VALUE ADDED TAX MACHINERY IN KERALAshodhganga.inflibnet.ac.in/bitstream/10603/13256/16/16...1206/65/Rev. dt. 19/07/1965. 1. The Kerala General Sales Tax Act, 1963 2. The

116

Chapter 4

WORKING OF VALUE ADDED TAX MACHINERY IN KERALA

The erstwhile Agricultural Income Tax and Sales Tax Department was

under the administrative control of the Board of Revenue under the Kerala

Board of Revenue Act, 1957. For administrative convenience, the State was

divided into three zones, viz. north, central and south. Each zone was in charge

of a Deputy Commissioner of Agricultural Income Tax and Sales Tax. From

the revenue point of view, the central zone was the most important one in

respect of both sales-tax and agricultural income-tax. Below the zonal level

there were separate officers for agricultural income tax and sales tax

administrations. For sales tax administration each zone was divided into

districts. Each district was in charge of an Inspecting Assistant Commissioner

of Agricultural Income Tax and Sales Tax. A sales tax district was co-terminus

with a revenue district and there are as many sales tax districts as there are

revenue districts.

The jurisdictions of the Inspecting Assistant Commissioners in charge of

sales-tax are given in Table 4.0.

For agricultural income-tax there were two Assistant Commissioners, viz.

1. The Inspecting Assistant Commissioner of Agricultural Income-tax and

Sales-tax (Special), South and Central zones, Kottayam.

117

2. The Inspecting Assistant Commissioner of Agricultural Income-tax and

Sales-tax (special), North zone, Kozhikode.

Table 4.0: Jurisdictions of the Inspecting Assistant Commissioners

in Charge of Sales Tax

Zone District Headquarters

South zone 1. Trivandrum Trivandrum 2. Quilon Quilon 3. Alleppey Alleppey

Central zone 1. Ernakulam Ernakulam 2. Trichur Trichur 3. Kottayam Kottayam

North zone 1. Kozhikode Kozhikode 2. Cannanore Cannanore 3. Palghat Palghat

As regards the appellate side, there were 13 Appellate Assistant

Commissioners for Agricultural Income Tax and Sales Tax. The Appellate

Assistant Commissioners were under the immediate administrative control of

the respective Zonal Deputy Commissioners.

For sales tax administration each district was divided into several

Circles. The Circle is the smallest administrative unit, but it is the pivot of the

entire administration. The assessment, levy and collection of tax are made in

the Circles. Each Circle is in charge of a sales tax officer. In some Circles,

there are also one or more assistant sales-tax officers having jurisdiction not

exceeding Rs.20000. Each district has one or more Special Circles. A selected

number of the biggest cases in the district is dealt with in the Special Circles.

118

Roughly two-thirds of the sales tax revenue of the State come from the Special

Circles.

As regards, agricultural income tax, there are twelve Circles in the South

and Central zones under the control of the Inspecting Assistant Commissioner

(Special), Kottayam and 12 Circles in the north zone under the control of the

Inspecting Assistant Commissioner (Special), Kozhikode.

For prevention and detection of evasion in sales tax and agricultural

income tax, there is an Intelligence Wing attached to the Board of Revenue

under the control of a Deputy Commissioner (Intelligence). The Intelligence

Wing has got six mobile squads, each under an officer in the rank of a sales tax

officer. The Deputy Commissioner (Intelligence) has jurisdiction throughout

the State. There are 19 border check posts and 7 internal check posts for

controlling the movement of goods. These check posts are under the control of

the Deputy Commissioner (Intelligence).

There is a legal wing under the Board of Revenue. It consists of an

Assistant Secretary (Law) with his office at Ernakulam and a Law Officer with

his office at Trivandrum. Both these officers are attached to the Board of

Revenue. The Assistant Secretary (Law) and the Law Officer are of the rank of

Assistant Commissioners. The Assistant Secretary (Law), besides giving legal

assistance to the Board of Revenue in matters relating to Agricultural Income

Tax and Sales Tax, also functions as a Liaison Officer between the Department

119

and the Advocate General in matters connected with original petitions, tax

revision cases, etc. The Law Officer is the state representative in the Appellate

Tribunal. He also gives legal advice to the Inspecting Assistant Commissioners

in the matter of filing second appeals before the Agriculture Income Tax and

Sales Tax Appellate Tribunal. There is an Internal Audit Official for receipt

audit under the control of the Deputy Commissioner (Intelligence).

The Board of Revenue constituted under the Kerala Board of Revenue

Act, 1957, is the administrative head of the agricultural income-tax and sales-

tax department. The Board consists of three members. The business of the

Board is transacted by the full board in certain matters and by the individual

members in respect of the others. The distribution and disposal of the business

are governed by the rules framed for the purpose.

According to the allocation of the departments under the control of the

Board among its members, the second member is in charge of Agricultural

Income Tax and Sales Tax Department. In respect of Agricultural Income Tax

and Sales Tax Department, the powers and functions under the following

enactments are assigned to the second member as per G.O. Rt. No.

1206/65/Rev. dt. 19/07/1965.

1. The Kerala General Sales Tax Act, 1963

2. The Agricultural Income Tax Act, 1950

3. The Central Sales Tax Act, 1956

4. The Kerala Surcharge on Taxes Act, 1957

120

There is a Secretary to the Board who is the General Head of the Board

Office. He is in full charge of the land revenue branch and exercises overall

superintendence and control over the remaining branches. Each of the

remaining branches is under the head of the office. The Agricultural Income

Tax and Sales Tax Department is under the Secretary (Taxes). He is assisted

by an Assistant Secretary (Taxes). The Head office of the Agricultural Income

Tax and Sales Tax Department is thus the Agricultural Income Tax and Sales

Tax branch of the Board of Revenue. The Board of Revenue was abolished in

1998 as per Board of Revenue Abolition Act, 1998.

The administrative set up of the Agricultural Income Tax and Sales Tax

Department is given in Fig.4.1.

The name of the Sales Tax Department has been subsequently

changed to and as Commercial Taxes Department. Department of Commercial

Taxes which administers the sales tax law of this State is under the control and

general supervision of the Commissioner, Commercial Taxes Department. He

is assisted in his functions by Joint Commissioners, Deputy Commissioners,

Inspecting Assistant Commissioners and Sales Tax Officers.

121

Fig: 4.1: Administrative Setup of the Agricultural

Income Tax and Sales Tax Department

Board of Revenue

Secretary(Taxes)

Assistant Secretary (Taxes)

Deputy Commissioner

(Law)

Law Officer & Add. Law Officer

Deputy Commissioner

Deputy Commissioner (Appeals)

Deputy Commissioner (Intelligence)

Inspecting Assistant Commissioners of

Agricultural Income Tax and Sales Tax

Inspecting Assistant Commissioners of

Agricultural Income Tax and Sales Tax (Special)

Appellate Assistant Commissioners

Sales Tax Officers, Assistant Sales Tax

Officers & Sales Tax Insp.

Agricultural Income Tax Officers and Junior Agricultural

Income Tax Officers

Check Posts

Intelligence Squads

Internal Audit Staff

122

A selected number of assessments involving high turnover is dealt with

in Special Circles by Assistant Commissioners and others in Ordinary Circles

by Sales Tax Officers. Assessment of work contracts is done by Sales Tax

Officers attached to the Deputy Commissioners in each district. A sales tax

district is co-terminous with a revenue district and the cases of defaults in

payment of sales tax are reported to the District Collector for recovery under

the Kerala Revenue Recovery Act.

Structure of Commercial Taxes Department under VAT

For administrating the VAT law, there is no separate department. The

Government of Kerala has given powers to the Commercial Taxes Department

under KGST Act to administer VAT law also through a Statutory Order. It is a

fact that certain items like sale of petroleum products and liquor are still

administered under the KGST Act. So, at present the Commercial Taxes

Department administers both VAT Act and KGST Act. The Department of

Commercial Taxes which administers the VAT law is now under the control

and general supervision of the Commissioner, Commercial Taxes Department.

The administrative setup of the Commercial Taxes Department is given

in Fig.4.2.

123

Fig: 4.2: Administrative Setup of the Commercial Taxes Department

Asst.Commissioner

(Check Post)

Commissioner

Joint Commissioner

Deputy Commissioner

Deputy Commissioner

(Appeals)

Deputy Commissioner

(Audit Assessment)

Member (STAT)

Deputy Commissioner (Intelligence)

Inspecting Asst. Commissioner

Assistant Commissioner

Commercial Tax Officer (Audit Assessment)

Inspecting Asst. Commissioner (Int.)

Inspecting Asst. Commissioner (I.B.)

Intelligence Officer

Intelligence Officer (IB)

Int. Inspector Int. Inspector (IB)

Commercial Tax Officer/ Sales Tax Officer

Inspector/ASTO/J.S

124

The present chapter has been given to assess the perception of

manufacturers/traders and VAT officials about the working of Value Added

Tax Machinery in Kerala based on some well defined variables (given in

Chapter 1).

4.1 Perception of Manufacturers/Traders

One of the major benefits as claimed by the supporters of VAT is that it

reduces the cascading effect which is true in the case of manufacturers/ traders

to the extent that set off or input tax credit is available for tax paid on purchases

from registered dealers in the State. However, no input tax credit is available

for tax paid on interstate purchases. It is true that CST is being phased out

gradually. The concessional rate against C form was reduced from 4 per cent to

3 per cent from 1st April 2007 and to 2 per cent from 1st June 2008. If CST is

completely phased out, the burden of tax on the manufacturer in respect of

interstate purchase of raw materials will be lifted.

Another major advantage is that input tax credit is also available for tax

paid on capital goods purchased from within the State, although in 12 equal

monthly installments for industrial units and for others in 36 monthly

installments. There is considerable delay in granting refund and the time

consuming elaborate procedures have to be followed for claiming refund and in

most cases the refunds are rejected for minor technical defects.

125

In Kerala, the classification of goods under various schedules is made

based on the HSN coding system. However, there is often difference in opinion

regarding classification which leads to litigation.

Another problem that dealers face is the multitude of formats for

invoices. There are separate invoices for sale by trader to trader, for sale by

trader to retailer, for medicines, for jewelers, for compounded tax payers, etc.

The form to be produced for claiming refund (Form 21 J) has to be issued by

the suppliers and to be countersigned by his Assessing Authority. This makes

the claim of refund all the more cumbersome.

The perception of manufacturers/traders on various aspects of the

working of the VAT machinery is assessed as under.

1. Knowledge of the Administrative Machinery under the Earlier KGST

KGST Act was introduced in the year 1963 and hence the majority of

manufacturers/traders might be aware of the Machinery under the KGST Act.

The government took several steps in the past to make manufacturers/ traders

aware of the machinery. In the study an enquiry was made to understand

whether the manufacturers/traders have the knowledge of the Administrative

Machinery under the earlier KGST.

Table 4.1 shows that the majority of the respondents (62%) are aware of

the Administrative Machinery under the earlier KGST, whereas 38 per cent of

126

the respondents are not aware of the Machinery. However the chi-square test

shows a significant difference of opinion among the respondents.

Table 4.1: Knowledge of the Administrative Machinery under the Earlier

KGST (Opinion of Manufacturers/ Traders)

Source: Primary data.

Chi square (df=2) = 6.53, p value =.04<0.05

2. Knowledge of the Administrative Machinery under the Present VAT

System

The VAT was introduced in the year 2005 and hence the majority of the

manufacturers/traders might not be aware of the Administrative Machinery

under VAT law. The government has been endeavouring to educate the state-

holders about the Administrative Machinery by means of advertisements and

media. In the study an attempt was also made to know whether the

manufacturers/traders have the knowledge of the Administrative Machinery

under VAT system.

Table 4.2 shows that 72 per cent of the respondents are aware of the

Administrative Machinery under the present VAT system, whereas 28 per cent

are not aware of the Machinery. But the chi-square test shows no significant

difference of opinion among respondents in the three zones.

Opinion South Central North Total

No. % No. % No. % No. % Yes 28 56.0 24 48.0 40 80.0 93 62.0No 22 44.0 26 52.0 10 20.0 57 38.0

Total 50 100.0 50 100.0 50 100.0 150 100.0

127

Table 4.2: Knowledge of the Administrative Machinery under the VAT

System (Opinion of Manufacturers/ Traders)


Chi square (df=2) = 0.79, p value =0.67>0.05

3. Opinion on the Statement “Existing Tax Machinery under VAT is

Sound Enough for Its Successful Administration and Curbing Tax

Evasion” (Discussion of Second Hypothesis)

The primary duty of the department Machinery is to prevent the

practice of tax evasion and to generate more revenues to the government. In the

study the manufacturers/traders were asked to comment about the soundness of

the existing tax Machinery under VAT to test the null hypothesis that the

existing Machinery under Value Added Tax is not sound enough for its

successful administration as well as for curbing tax evasion.

The majority of the respondents (68.7%) are of opinion that the existing

tax Machinery under VAT is sound enough for its successful administration

and curbing tax evasion, while 31.3 per cent say ‘no’ (Table 4.3). The chi-

square test also shows no significant difference of opinion among the

respondents in the three zones.


No. % No. % No. % No. % Yes 38 76.0 34 68.0 36 72.0 108 72No 12 24.0 16 32.0 14 28.0 42 28Total 50 100.0 50 100.0 50 100.0 150 100.0

128

Table 4.3: “Existing Tax Machinery under VAT is Sound Enough for Its

Successful Administration and Curbing Tax Evasion” (Opinion of

Manufacturers/ Traders)


Chi square (df=2) = 1.40, p value = 0.50>0.05

*95% Confidence limit=61% to 77%.

The above analysis clearly establishes the fact that the existing

Machinery under VAT is sound enough for its successful administration as

well as curbing tax evasion with 95 per cent confidence limits of the proportion

varying from 61 per cent to 77 per cent (i.e. if we put the question to the entire

population, not less than 61 per cent will state in the same direction, but not

more than 77 per cent). Thus, the null hypothesis is rejected with 95 per cent

confidence.

4. Opinion on the Statement “Officers are Friendly with Assessees”

Officers of the tax Machinery are always friendly with the assessees.

The Government has, through various workshops and seminars, given adequate

training to the officers to be friendly with the assessees since their role is to

contribute maximum amount to the State’s exchequer through remittance of

tax.


No. % No. % No. % No. % Yes 30 60.0 36 72.0 37 74.0 103 68.7*No 20 40.0 14 28.0 13 26.0 47 31.3

Total 50 100.0 50 100.0 50 100.0 150 100.0

129

Regarding the statement “Officers are friendly with assessees”, 58.7 per

cent of the respondents are of the view that the tax officers are friendly with

assessees (Table 4.4). It is interesting to note that 24.7 per cent of the

respondents have no opinion about the observation that officers are friendly

with assessees. But the chi-square test shows a significant difference of opinion

among the respondents.

Table 4.4: “Officers are Friendly with Assessees”

(Opinion of Manufactures/ Traders)


No. % No. % No. % No. % Agree 20 40.0 32 64.0 36 72.0 88 58.7Disagree 13 26.0 9 18.0 3 6.0 25 16.7No opinion 17 34.0 9 18.0 11 23.0 37 24.7Total 50 100.0 50 100.0 50 100.0 150 100.0


Chi square (df=4) = 13.36, p<0.01

5. Opinion on the Statement “Officers Find Time to Give Assistance”

Under the VAT law, the number of dealers is expected to be more, as

compared to the earlier KGST Act and, therefore, the time available to the

officers for giving assistance to the dealers will be less.

Regarding the statement “Officers find time to give assistance”, 52 per

cent of the respondents in the central zone and 64 per cent in the north zone are

in agreement with the view that officers find time to give assistance, whereas

42 per cent in the south zone disagree with the above view (Table 4.5). The

chi-square test also shows a significant difference of opinion among the

respondents.

130

Table 4.5: “Officers Find Time to Give Assistance” (Opinion of Manufacturers/ Traders)

Opinion South Central North Total No. % No. % No. % No. %

Agree 12 24.0 26 52.0 32 64.0 70 46.7Disagree 21 42.0 13 26.0 7 14.0 41 27.3No opinion 17 34.0 11 22.0 11 22.0 39 26.0Total 50 100.0 50 100.0 50 100.0 150 100.0

Source: Primary data. Chi square (df=4) =17.78, p<0.01

6. Opinion on the Statement “Officers are Colluding with Tax Evaders”

The mission of the officers is to give maximum assistance to the law

abiding assessees. If they practice tax evasion, then the officers have to take

appropriate legal action under the VAT Act.

In the study the respondents were asked to express their view on the

statement “Officers are colluding with tax evaders”, the majority of the

respondents (52.0%) disagree with the view that officers are colluding with tax

evaders (Table 4.6). It is interesting to note that 40% of the respondents have

no opinion about the above view. But the chi-square test shows no significant

difference of opinion among the respondents.

Table 4.6: “Officers are Colluding with Tax Evaders” (Opinion of Manufacturers/ Traders)



Source: Primary data. Chi square (df=4) = 7.54, p>0.05

131

7. Opinion on the Statement “Getting Certificates in Time”

It is the duty of officers to give necessary certificates in time to the

dealers. But owing to increase in the number of dealers, there may be some

delay in issuing certificates in time to the dealers.

While conducting the survey, the respondents were asked whether they

were getting necessary certificates in time. 49.3 per cent of the respondents say

that they are getting certificates in time, whereas 34 per cent disagree with that

view (Table 4.7). The chi-square test also shows a significant difference of

opinion among the respondents.

Table 4.7: “Getting Certificates in Time”

(Opinion of Manufacturers/ Traders)

Opinion South Central North Total No. % No. % No. % No. %

Agree 33 66.0 32 64.0 19 38.0 74 49.3

Disagree 16 32.0 14 28.0 16 32.0 51 34.0No opinion 1 2.0 4 8.0 15 30.0 25 16.7Total 50 100.0 50 100.0 50 100.0 150 100.0


Chi square (df=4) = 14.94, p<0.01

8. Opinion on the Statement “Getting Refunds in Time”

The officers have to issue orders for refund of tax after completing the

various legal formalities under the VAT law. Hence, there may be some delay

in issuing orders for refund of tax to the dealers.

132

The responses of the manufacturers/traders on the statement “Getting

refunds in time”, given in Table 4.8 show that 57.3 per cent disagree with the

view that they are getting refunds in time whereas 22.7 per cent agree with the

view that they are getting the refunds in time. Meanwhile 20 per cent have no

opinion about the view. The chi-square test also shows a significant difference

of opinion among the respondents.

Table 4.8: “Getting Refunds in Time”

(Opinion of Manufacturers/ Traders) Opinion South Central North Total

No. % No. % No. % No. % Agree 16 32.0 14 28.0 5 10.0 34 22.7Disagree 28 56.0 27 54.0 31 62.0 86 57.3No opinion 8 16.0 9 18.0 14 28.0 30 20.0

Total 50 100.0 50 100.0 50 100.0 150 100.0Source: Primary data.

Chi square (df=4) = 10.63, p<0.05

9. Opinion on the Statement “No Delay in the Assessment”

Under the earlier KGST Act, assessments in respect of dealers were

made yearly. Even then there was delay in completing the assessments in time.

Under the present VAT system, the assessments have to be made every month

and hence there may be delay in completing the assessments in time.

Regarding the statement “No delay in the assessment”, 52.7 per cent of

the respondents are of the opinion that there is delay in the assessment, whereas

24.7 per cent agree with the view that there is no delay and 22.17 per cent have

no opinion about this view (Table 4.9). The chi-square test also shows a

significant difference of opinion among the respondents.

133

Table 4.9: “No Delay in the Assessment”


Source: Primary data. Chi square (df=4) = 11.98, p<0.05

10. Opinion on the Statement “Penalties are not Heavy”

Under the present VAT system, the dealers have to file returns through

self-compliance. In case the sales tax department detects tax evasion by the

dealers, the penalties imposed will be high.

In the study the respondents were asked to comment on the statement

“in case the department at a later stage detects practices of evasion of tax by the

dealers, the penalties provided under the present VAT system are not heavy”,

the majority of the respondents (53.3%) are of the opinion that penalties are

heavy, while 22 per cent say that penalties are not heavy (Table 4.1).

Meanwhile, 24.7 per cent have no opinion about this view. The chi-square test

also shows a significant difference of opinion among the respondents.


No. % No. % No. % No. % Agree 17 34.0 12 24.0 8 16.0 37 24.7Disagree 24 48.0 31 62.0 24 48.0 79 52.7No opinion 9 18.0 7 14.0 18 36.0 34 22.6

Total 50 100.0 50 100.0 50 100.0 150 100.0

134

Table 4.10: “Penalties are not Heavy”



Chi square (df=4) = 9.62, p<0.05

11. Opinion on the Statement “Do not Deny Input Tax Credit on Minor

Grounds”

The main advantage of the VAT law is that the dealers can avail

themselves of input tax credit on the purchases within the State made by them.

Hence it is the duty of the officers to see that the input tax credit is not denied

to the dealers on minor grounds. The opinion collected from

manufacturers/traders on the statement “Do not deny input tax credit on minor

grounds”, 38 per cent feel that input tax credit is denied on minor grounds,

whereas 36 per cent feel that input tax credit is not denied (Table 4.11). But 25

per cent have no opinion about this view. The chi-square test also shows a




135

Table 4.11: “Do not Deny Input Tax Credit on Minor Grounds”



Chi square (df=4) = 13.31, p<0.05

12. Opinion on the Statement “Administrative Machinery Failed to Benefit

End Users and Added More Burdens”

The aim of the Administrative Machinery is to implement the VAT law

as intended by the Legislature and to have cordial relationship with the dealers,

consumers and the public. The Administrative Machinery is never intended to

harass the end-users and to put more burdens on them.

The opinion collected from manufacturers/traders to assess whether the

administrative machinery failed to benefit end users and added more burdens,

29.3 per cent disagree with the view that the Administrative Machinery failed

to benefit end users, while 28 per cent agree with the view. But 42.7 per cent

have no opinion about this (Table 4.12). The chi-square test also shows a




136

Table 4.12: Administrative Machinery Failed to Benefit End Users and

Added More Burdens (Opinion of Manufacturers/ Traders)


Chi square (df=4) = 18.19, p<0.01

4.2 Perception of VAT Officials

While introducing the VAT Act, the government felt the need for

chalking out a programme of imparting training to the officers on VAT, for

formulating strategies to prevent tax evasion and fraud, for modernizing

information system in tax administration in the State and for introducing

educational programme for traders and public.

Though adequate training was given to the officers through various

seminars and workshops, the VAT in Kerala was understood by the officers as

an added burden to increase the work load and to reduce their official position.

They accepted the VATwith aversion, but later on studied the scheme and

started implementing it positively. The density of wisdom of VAT officers has

gone up in multiples, compared to sales tax officers under KGST Act.

The perception of VAT officials on various aspects of the working of

the VAT Machinery is assessed as under.

Opinion South Central North All


137

1. Opinion on the Statement “Officers are Friendly with Assessees”

For the effective administration and collection of taxes the officers

should always be friendly with assessees. The duties of the officers are to give

registration to the dealers, to watch whether registered dealers are filing the

returns in time and to complete the assessments in time. Normally, there is no

scope for officers colluding with the assessees. But when the assessees

practice fraud to evade tax, then the officers may take appropriate actions under

the Act against the assessees.

Regarding the opinion on the statement “officers are friendly with

assessees”, most of the respondents (86.7%) say that officers are friendly with

assessees (Table 4.13). But 10 per cent of the respondents have no opinion on

the statement. The chi-square test also shows no significant difference of


Table 4.13: “Officers are Friendly with Assessees” (Opinion of VAT Officials)


Chi square (df = 4) =4.54, P >0.05



138

2. Opinion on the Statement “Officers Find Time to Give Assistance”

As compared to the earlier KGST Act, the number of dealers under VAT

law has increased and consequently the workload of the officers has also

increased several folds. In such circumstances, the officers may not normally

get time to give assistance to the assessees.

While conducting the survey the respondents were asked to comment on

whether VAT officials find time to give assistance to assessees. 46.7 per cent

say that officers find time to give assistance, whereas 40 per cent say that

officers find no time (Table 4.14). The chi-square test also shows no significant


Tale 4.14: “Officers Find Time to Give Assistance”

(Opinion of VAT Officials)

Source: Primary data. Chi square (df = 4) =1.14, P>0.05

3. Opinion on the Statement “Officers are Colluding with Tax Evaders”

Officers will never collude with tax evaders. On the contrary, the tax

evaders will be penalized under the various provisions of VAT law. The duty

of the officers is to take steps to curb tax evasion by the dealers so that the

government will get its due share of tax.



139

From the response collected from VAT officials to check whether they

are colluding with tax evaders, 83.3 per cent believe that officers are not

colluding with tax evaders (Table 4.15), whereas 10 per cent have no such

opinion. The chi-square test also shows no significant difference of opinion


Table 4.15: “Officers are Colluding with Tax Evaders”



Chi square (df = 4) =6.56, P>0.05

4. Opinion on the Statement “Officers are Giving Certificates in Time”

In VAT, each officer has to deal with more assessees than under the

earlier KGST system since the number of dealers is expected to be more under

VAT system. In such a case, there may be some delay in giving certificates in

time.

Regarding the statement “Officers are giving certificates in time”, 76.7

per cent of the respondents are of the view that officers are giving certificates

in time (Table 4.16). But 10 per cent say that the certificates are not given in

time. The chi-square test also shows no significant difference of opinion among

the respondents.



140

Table 4.16: “Officers are Giving Certificates in Time”



Chi square (df = 4) =4.61, P>0.05

5. Opinion on the Statement “Giving Refunds Due in Time”

Under the VAT law, the number of dealers is expected to be more and

the assessments have to be made on a monthly basis. The refund orders have to

be issued to the dealers after complying with the various provisions of VAT

law. Owing to the above reasons, there may be some delay in issuing orders of

refund to the dealers.

In the study VAT officials were asked to comment on whether they are

giving refunds due in time, 50 per cent of the respondents agree with the view

that refunds due are paid in time, whereas 33.3 per cent do not agree with the

above view (Table 4.17). But the chi-square test finds no significant difference

of opinion among the respondents.



141

Table 4.17: “Giving Refunds Due in Time”



Chi square (df = 4) =6.40, p>0.05

6. Opinion on the Statement “No Delay in the Assessment”

Under VAT law, assessment in respect of each dealer has to be

completed on a monthly basis, as compared to earlier KGST Act where

assessments were completed on a yearly basis. Hence there may be some delay

in completing the assessments in time under VAT law.

Regarding the statement “No delay in the assessment”, 50 per cent of the

respondents in the central zone and 70 per cent in the north zone agree that

there is no delay in the assessment, whereas 40 per cent in the south zone do

not agree with the above view. It is interesting to note that 50 per cent in the

south zone have no opinion on the view that there is no delay in the assessment

(Table 4.18). But the chi-square test finds no significant difference of opinion




142

Table 4.18: “No Delay in the Assessment”



Chi square (df = 4) = 8.22, p>0.05

7. Opinion on the Statement “Penalties are not Heavy”

VAT will replace the existing system of inspection with a system of

built-in self assessment by the dealers and departmental auditing. The tax

structure will become simple and more transparent. As a result, the tax evasion

will be less and penalties imposed are not heavy.

Table 4.19: “Penalties are not Heavy”



Chi square (df = 4) =8.25, P>0.05

With regard to the statement “Penalties are not heavy”, most of the

respondents (80%) agree that the penalties imposed are not heavy and 10 per

cent of the respondents disagree with the above view (Table 4.19). The chi-




No. % No. % No. % No. % Agree 8 80.0 9 90.0 7 70.0 24 80.0 Disagree 0 0.0 0 0.0 3 30.0 3 10.0 No opinion 2 20.0 1 10.0 0 0.0 3 10.0 Total 10 100.0 10 100.0 10 100.0 30 100.0

143


respondents.

8. Opinion on the Statement “Do not Deny Input Tax Credit on Minor

Grounds”

In the VAT system, a set-off is given for input tax as well as tax paid on

previous purchases. Normally, officers do not deny input credit on minor

grounds.

In the study the VAT officials were asked to comment on whether they

deny input tax credit on minor grounds. Table 4.20 exhibits that 70 per cent of

the respondents agree that the officers do not deny input tax credit on minor

grounds, whereas 13.3 per cent have no opinion about this view. The chi-


respondents.

Table 4.20: “Do not Deny Input Tax Credit on Minor Grounds”



Chi square (df = 4) = 8.30, P>0.05



144

9. Opinion on the Statement “Getting Assistance from Higher Officers”

Since the introduction of VAT, higher officers have been giving more

assistance to the officers to sort out the problems arising out of availing of

input tax credit, completion of assessment and refund of tax to the dealers.

The response collected from VAT officials regarding the statement

“Getting assistance from higher officers” the majority (70%) agree that they are

getting assistance from higher officers, whereas 16.7 per cent disagree with the

above view (Table 4.21). The chi-square test also shows no significant


Table 4.21: “Getting Assistance from Higher Officers”



Chi square (df = 4) = 3.25, p>0.05

10. Opinion on the Statement “Able to Complete the Verification of

Returns on the Date of Filing”

Owing to an increase in the number of dealers and due to monthly

assessments under the VAT law, the officers may not be able to complete the

verification of returns on the due date of filing.


No. % No. % No. % No. % Agree 6 60.0 6 60.0 9 90.0 21 70.0

Disagree 2 20.0 2 20.0 1 10.0 5 16.7No opinion 2 20.0 2 20.0 0 0.0 4 13.3Total 10 100.0 10 100.0 10 100.0 30 100.0

145

From the opinion collected on this aspect, 86.7 per cent of the

respondents do not agree that they are able to complete the verification of

returns on the date of filing. But 10 per cent do not express any opinion (Table

4.22).The chi-square test also shows no significant difference of opinion among

the respondents.

Table 4.22: “Able to Complete the Verification of Returns on the Date of Filing”



Chi square (df = 4) =4.08, p>0.05

11. Opinion on the Statement “Officers have Discretionary Powers”

The primary duty of the officers is to implement the VAT law in its true

sense and thereby generate more revenue to the government. At the same time

the officers should be friendly with the dealers. In that process, the officers can

have some discretionary powers.

Regarding the statement “Officers have discretionary powers”, 60 per

cent of the respondents of the south zone and 90 per cent in the north zone

believe that the officers have discretionary powers, whereas 60 per cent of the

in the central zone do not believe that the officers have discretionary powers


No. % No. % No. % No. % Agree 0 0.0 0 0.0 1 10.0 1 3.3

Disagree 9 90.0 8 80.0 9 90.0 26 86.7No opinion 1 10.0 2 20.0 0 0.0 3 10.0

Total 10 100.0 10 100.0 10 100.0 30 100.0

146

(Table 4.23). The chi-square test also shows a significant difference of opinion


Table 4.23: “Officers have Discretionary Powers”



Chi square (df = 4) = 13.42, P<0.01

12. Opinion on the Statement “Officers Are Overburdened with Work”

It is a fact that the officers under VAT are more burdened with works

than under the earlier KGST due to an increase in the number of dealers and

the need to complete the assessments on a monthly basis.

In the study the respondents were also asked to comment on whether

they are overburdened with work, 83.3 per cent view that the officers are

overburdened with work, whereas 6.7 per cent agree that they are not

overburdened (Table 4.24). The chi-square test also shows no significant




147

Table 4.24: “Officers Are Overburdened with Work”



Chi square (df = 4) = 4.32, P>0.05

13. Opinion on the Statement “Giving Input Tax Credit in Time”

It is the duty of the officers to see that the dealers are not misusing the

benefit of input tax credit. The officers are always finding time to see that input

tax credits to the dealers are given in time. Regarding the statement “Giving

input tax credit in time”, 83.3 per cent of the respondents are of the view that

input tax credits are given in time. But 13.33 per cent say ‘no’ (Table4.25). The

chi-square test also shows no significant difference of opinion among the

respondents.

Table 4.25: “Giving Input Tax Credit in Time”



Chi square (df = 4) = 2.58, P>0.05





148

14. Opinion on the Statement “Small Dealers Are Punished on a Par with

Big Ones”

The VAT law does not distinguish between a small dealer and a big

dealer. But when a big dealer evades tax, the government will lose more

revenue and hence there is a tendency to punish the big dealers rather than the

smaller ones.

The response of VAT officials on the statement “Small dealers are

punished on a par with big dealers, 60 per cent of the respondents in the central

zone and 80 per cent in the north zone do not agree with the view that small

dealers are punished on a par with big dealers, whereas 60 per cent in the south

zone are of the view that small dealers are punished on a par with big ones

(Table 4.26). But the chi-square test shows no significant difference of opinion


Table 4.26: “Small Dealers Are Punished at Par with Big Ones”



Chi square (df = 4) = 7.40, P>0.05



149

15. Opinion on the Statement “Tax Administration has not been Geared

up for Implementing VAT”

Before the implementation of VAT, the government conducted various

seminars and workshops to educate the officers about the VAT law. In that

sense the tax administration has been geared up to a certain extent for

implementing VAT.

The response collected from VAT officials on the statement “Tax

administration has not been geared up for implementing VAT”, 60 per cent in

the south zone and70 per cent in the north zone are of the opinion that tax

administration has not been geared up for implementing VAT. At the same

time 60 per cent in the central zone say that Tax Administration has been

geared up for implementing VAT (Table 4.27). But the chi-square test shows

no significant difference of opinion among the respondents.

Table 4.27: “Tax Administration has not been Geared up for

Implementing VAT” (Opinion of Vat Officials)


Chi square (df = 4) = 6.40, P>0.05



150

16. Opinion on the Statement “Machinery Failed to Benefit End Users and

Added More Burdens”

The department machinery is never intended to harass the dealers and in

that sense the machinery has neither failed to benefit the end users and nor

added more burdens.

The response collected from VAT officials on the statement “Machinery

failed to end users and added more burdens”, Table 4.28 exhibits that 70 per

cent of the respondents of the south zone are of the view that machinery failed

to benefit end users and added more burden, whereas 60 per cent in the central

zone and 50 per cent in the north zone do not agree that the machinery failed to

benefit end users and added more burden. But the chi-square test shows no

significant difference of opinion among respondents.

Table 4.28: “Machinery Failed to Benefit End Users and Added more

Burdens” (Opinion of VAT Officials)


Chi square (df = 4) = 7.55, P>0.05

17. Opinion on the Statement “The Role of Assessing Authorities has been

Degraded after VAT”

Under the earlier KGST Act, the offices could exercise wide powers

while completing the assessment of the dealers. In VAT, the officers have to


No. % No. % No. % No. % Agree 7 70.0 2 20.0 2 20.0 11 36.7Disagree 2 20.0 6 60.0 5 50.0 13 43.3

No opinion 1 10.0 2 20.0 3 30.0 6 20.0Total 10 100.0 10 100.0 10 100.0 30 100.0

151

scrutinize and accept the return and complete the assessment and audit scrutiny

is conducted only in selected cases. In that sense, the role of assessing

authorities may, in a limited way, have been de-graded after the introduction of

VAT.

The opinion of VAT officials on the statement “Role of assessing

authorities has been degraded after VAT”, Table 4.29 depicts that the majority

of the respondents (53.3%) do not agree with the view that the role of assessing

authorities has been degraded as a result of VAT, while 33.3 per cent agree

with the above view. The chi-square test also finds a significant difference of


Table 4.29: “Role of Assessing Authorities has been Degraded after VAT”



Chi square (df = 4) =9.38, P<0.05

18. Opinion on the Statement “Giving Periodic Training to Administer

VAT”

The Government is conducting various seminars and workshops to give

periodic training to the officers to administer VAT. It is a fact that periodic

training is necessary to administer VAT effectively.



152

Regarding the statement “Giving periodical training to administer VAT”

Table 4.30 reveals that 36.7 per cent of the respondents agree with the view

that periodic training to administer VAT is given, whereas 43.3 per cent

disagree with the above view. The chi-square test also shows no significant

difference of opinion among the respondents with this aspect.

Table 4.30: “Giving Periodic Training to Administer VAT”



Chi square (df = 4) = 7.55, P>0.05

19. Opinion on the Statement “The Existing Machinery under VAT

System Is Sound Enough to Curb Tax Evasion”

In order to generate more revenue to the government and to detect

evasion of tax, the VAT machinery system should be strengthened. Some of the

officers still believe that there is a need for further strengthening the existing

machinery under the VAT system to curb tax evasion.

In the study an assessment was also made to check whether the existing

machinery under VAT is sound enough to curb tax evasion. Table 4.31 shows

that 60 per cent of the respondents are of the view that the existing Machinery

under VAT system is sound enough to curb tax evasion, whereas 40 per cent



153

view that the existing Machinery under VAT system is not sound enough. The

chi-square test also shows no significant difference of opinion among the

respondents.

Table 4.31: “The Existing Machinery under VAT System Is Sound enough

for Its Successful Administration and Curbing Tax Evasion”



Chi square (df = 2) = 0.29, p value=.87>0.05


No. % No. % No. % No. % Yes 7 70.0 6 60.0 5 50.0 18 60.0No 3 30.0 4 40.0 5 50.0 12 40.0Total 10 100.0 10 100.0 10 100.0 30 100.0

WORKING OF VALUE ADDED TAX MACHINERY IN KERALAshodhganga.inflibnet.ac.in/bitstream/10603/13256/16/16...1206/65/Rev. dt. 19/07/1965. 1. The Kerala General Sales Tax Act, 1963 2. The

Documents