VAT hounds TN channel

The random raids conducted by VAT officials have put channel partners in
Tamil Nadu dealing with consumables in a spot. Tamil Nadu state government has
asked the dealers who were billing ink cartridges and toners under four percent
VAT to pay 12.5 percent VAT for all those products that have been sold from
2007.

Several dealers have been affected because of this sudden notice from the VAT
department, as the dealers have been billing toners and ink cartridges at only
four percent VAT. The channel claims that their vendors and distributors had
instructed them to bill the consumables at four percent and never informed them
about the state government's clarification of paying 12.5 percent on
consumables.

A notice has been served to Madurai-based Sunvin Computers and few other
channel partners in Chennai to pay 12.5 percent of VAT for all those ink
cartridges and toners sold from 2007 to till date.

J Vincent, Proprietor, Sunvin Computers, Madurai said, “We have been billing
consumables on the basis of four percent VAT and also getting the same from the
distributors and suddenly the commercial tax department has slapped a fine of
seven lakh and is asking us to pay 12.5 percent VAT for all those products that
we sold in the past two years, which might go to several crore. Moreover, the
customers also will not accept the sudden price hike.”

Vincent also added that there was no proper communication from the state
government and consumables carry only four percent VAT according to VAT Act.
“The state government has mentioned that all computer and computer-related
peripherals attract only four percent VAT, and printer and consumables are
computer-related peripherals due to their dependency on computers alone. So
these products attract four percent VAT, and if at all the products attract 12.5
percent VAT, then the vendors or the distributors need to bear the cost as they
were the ones who billed the product without clarity at four percent.”

Even Uttam Chand, CEO, Uttam Marketing, Chennai claimed that it is the
vendors' and distributors' responsibility to pay the extra VAT specified by the
commercial taxes department. “This confusion has been there for almost two years
and we have been communicating this fact to vendors and they in turn were saying
that they will safeguard us if we face any problem. However, nobody is coming to
support us or put a stay against the notice issued by the state government,” he
said.

A major office automation dealer, who has been served notice by the sales tax
department informed that a case has been filed challenging the notice. “We have
been billing the products at four percent from the disti and suddenly we were
served a notice by the sales tax department to pay a difference of 8.5 percent.
We have circulated the notice to the vendors as well as the distributors and
they are yet to come to us with any reply.Meanwhile we have filed a case in the
court challenging the notice and will fight with the evidence we have,” informed
the dealer on the condition of anonymity.

Confed-ITA has also taken up the issue and written to all vendors and
distributors asking for clarification. Vinod Kumar, Treasurer, Confed-ITA, is
spearheading the issue with the vendors and distributors.

“We have written to all the vendors as well as the distributors and are
waiting for their reply. This is going to be a serious issue for all in the
channel community as they have to pay a huge amount that might lead to several
crores. The vendors and the distributors have to take up the responsibility and
bail out the channel from this crisis,” said Kumar.

On the other hand, PN Prasad, President, Confed-ITA claimed that
Manufacturers Association for IT (MAIT) had been updated by the state government
of Tamil Nadu in 2007 that the ink cartridges and toners attract a VAT of 12.5
percent. “Despite getting the order from the state government of Tamil Nadu,
MAIT has not shared this with channels and this is a serious case of violation.
Every time vendors take the channel for a ride and this is yet another example
of that,” claimed Prasad.

When contacted Vinnie Mehta, Executive Director, MAIT said that the
association communicates any information it has to its members. “We circulate
any information through our members as our mode of communication is very limited
within our members only. In any kind of sensitive subjects like taxation, we
presume that our members take it to the right people and communicate it with
proper measures and advice to their respective channel community,” he said.

He also informed that he will look into this particular issue and check it
with the members of MAIT.