TN commercial tax dept clarifies stance on VAT

With the channel community in Tamil Nadu in quandary over the 12.5 percent
VAT that has been levied on toners and cartridges it has now come to light that
the Manufacturers Association for Information Technology (MAIT) was informed by
the Tamil Nadu tax department about the hiked rates of VAT applicable on
cartridges and toners.

The DQ Week contacted a high-ranking official from the commercial tax
department of Tamil Nadu for clarification. The official on condition of
anonymity said, “Tamil Nadu VAT Act—first schedule—part B clearly mentions that
toners and cartridges are excluded from the four percent tax, which means they
will attract a 12.5 percent VAT. It does not make sense to levy four percent tax
on a product that already attracts 12.5 percent.”

In fact the official also shared that the VAT cell had sent a letter to MAIT
clarifying the reasons why toners and cartridges attracted higher VAT. TA Jacob,
Commissioner of Commercial Taxes had written a letter to MAIT about the same.
MAIT had earlier insisted on a clarification on the rate of tax for toners and
ink cartridges.

The reply letter from the commissioner clarifies that inkjet cartridges and
toner cartridges are taxable at 12.5 percent with effect from January 1, 2007.

However, channel partners complained that this was not communicated to them
and hence they continued with four percent VAT.

Compounding the confusion is a February 2008 injunction taken by Canon India
from the Madras High Court against levying VAT higher than four percent. The
order restrains the appropriate authorities from taking any further steps to
recover tax in respect of sale of printer cartridges at a rate higher than four
percent. It was mentioned in the court that it is not possible to use printer
cartridge without a computer.

When contacted about the existing confusion Ravikumar, President, Computer
and Media Society (CAMS) , who seemed to be aware of the government's stance,
said, “We are in discussion with Confed-ITA and will take an appropriate
decision that will protect our members.”

PN Prasad, President, Confed-ITA, said, “This is not an issue that is
affecting just one channel partner, therefore, a collective effort is needed and
we are working towards it.”

Meanwhile, CAMS, held a meeting recently to discuss the issue and has decided
not to take the matter to court right away. The association has decided to
discuss the issue with the Commissioner of Commercial Tax. It will also give a
petition to the Chief Minister of Tamil Nadu, Deputy Chief Minister, and
Minister of Commercial Taxes requesting a bailout from this issue.