[A] GENERAL COMMENTS

For success of VAT it is imperative that there is total change in perception of both the tax administrator and the assesses. At the same time, the system needs to be trust based with greater dependence on post audits and systemic checks brought about after necessary research and studies.

It has to be ensured that the interaction with the department officials is reduced to the bare minimum. The act should be so drafted that there is no scope for discretion at the hands of assessing officers.

[B] SECTION WISE & PARAWISE SPECIFIC COMMENTS

Section/para	IIA suggestions
Section 14(2)-Explanation: To remove doubts it has been clarified that no input tax credit shall be admissible under the Act	(c) Input tax credit should be allowed in the case of works contract. (f) Input tax credit should be allowed in respect of purchase of a generator or a captive power plant including their parts, components and accessories. (g & h) Input tax credit should be allowed on capital goods purchased one year before the date of implementation of VAT.
Section 14 (4)	The time limit for submitting inventory along with amount of input tax credit should be modified as ninety days instead of thirty days.
Section 14 (5)	Input tax credit in respect of capital goods should be allowed in the same year.
Section 16 Subsection (II), (III), (IV), (V), (VI), (XII), (XIV), (XV)	The presumptions made in these subsections of section 16 are not logical. These subsections should be reworked and redrafted taking a pragmatic view giving reasonable room for unintentional human error.
Section 17 (1) (b)	All dealers who are registered with U.P. Trade Tax Act 1948 should be deemed to have registered under VAT Act.
Section 19 (Security in the interest of revenue)	Element of ambiguities and discretions contained in this section should be removed. Security for new manufacturers should be fixed at the existing value of maximum 15000. One time security should suffice and the provision for additional security should be removed.
Section 21 (16)	Maintaining day to day print out of all books, accounts and documents is not practical. Hence this para (Section 21 (16) should be removed from the Act.
Section 24	Discretionary provisions such as “best of his judgment” gives rise to corruption and undue harassment of the assesses. Hence should be removed. Tax deposit time period may be specified as monthly for value above Rs. 5 lacs and quarterly for below Rs. 5 lacs. Periodicity for filling return should also be made quarterly instead of monthly.
Section 27 (1)	The provision of change of opinion should be removed. If assessment has been done wrongly the officer concerned should be held responsible. This will help in reducing corruption. Hence the provision of re-assessment in this section should be removed except for tax evasions. “Under Explanation-I, again the discretion for “best of its judgment” should be removed.
Section 27 (3) & (4)	The period of 5 years should be reduced to 3 years. This will help in making the department smarter and will also help in improving the revenue receipts.
Section 28	Price variation could be both ways i.e. escalation as well as reduction. There is a mention of price escalation only in this section. The price reduction should be treated equally and hence the section should be redrafted accordingly.
Section 31	The system is required to be quick and responsible in today’s fast moving world. Therefore time period for rectifying of mistakes should also be fixed. We suggest that the orders should be released within 3 months from the date of filling the application.
Section 35 (4) (IV)	The condition of first or second charge of property in favour of the State Government is unreasonable. Hence subsection (4) (IV) should be removed.
Section 45 (2)	The provision of “at all reasonable times” is ambiguous hence needs to be specified clearly as “after the sunrise and before the sunset”(as in Income-Tax Act)
Section 45 (4)	Seizer of documents should not be required as it leads to corruption and harassment of the assesses. Even in the Union Budget it has been announced that there will not be any seizer of documents. Hence the provision of seizer of documents is required to be scrapped from this subsection.
Section 48	This section should be deleted on the same ground as stated for section 45 (4)
Section 54	IIA is of strong view that there is no need for prosecution of assesses as provided in section 54 of the draft VAT act. Hence the provision for prosecution should be removed.
Section 55	The very purpose of operating companies is to delegate powers at different levels for smoother functioning of any organization, Penalising Directors/MD for the errors committed by an employee of the company is unreasonable and unacceptable. Therefore sec. 55 may be amended accordingly.
Section 56	Section 56 provides for penalties on assesses. An exhaustive table has been drafted imposing penalties in respect of proposed offences that the assesses may commit . It is our contention that the purpose of penalties should not be that of generating revenue but in fact the spirit behind the penalties should be only to discourage the initiation of offence or to make assesses more vigilant. We regret informing you that the reading of the entire penalty schedule gives an impression that the intention is to generate revenue rather than discourage assesses. In any case the penalty should not exceed more than 5% of the Tax due. At the same time there should also be a provision for penalizing those officers who unethically utilize the penal provisions to blackmail the assesses. In fact there should be a system of grading the quality of assessment and in case it is found that the quality of assessment is not up to the mark or that an unreasonable/arbitrary/adhoc orders are passed causing harassment to the assesses, there should be a provision to recover the entire financial loss to the assesses from the concerned assessing officer.
Section 59 (6) & 61 (4)	The stay application should be decided on merit and as such there should be no requirement of submitting security.
Section 74 (1) (a)	The minimum and maximum amounts be rectified as Rs. 50/- and Rs. 250 respectively instead of Rs. 100/- and Rs. 1000/-
Section 74 (1) (b)	The minimum and maximum amounts be rectified as Rs. 250/- and Rs. 500/- respectively instead of Rs. 500/- and Rs. 2100/-.
Section 74 (3) (a)	On the principle of equity Exemption of fee in this para not stands to reasons. Hence fee should be made applicable.