VAT confusion mounts, CAMS to approach government

CHENNAI, INDIA: 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.”