VAT account up for grabs

The Ministry of Finance has invited the Top 10 agencies of Delhi to pitch for the estimated Rs 15-crore creative duties of the Value Added Tax (VAT) account. While the proposed date of the implementation of VAT on a nationwide basis was April 1, 2003, the implementation has been deferred sine die.

Since an awareness-cum-publicity campaign is an unavoidable precursor to the implementation of VAT, the Ministry is using the run-up time to assess advertising agencies to choose one that can discharge the duty. The objective essentially is to increase the acceptance of VAT among consumers and traders. Thus, the task for the agency would be to communicate the facts about VAT coherently and dispel the myths around it, which can be potentially damaging.

agencyfaqs! has learnt that the agency selection process involves two rounds of presentations. While in the first round the agencies submitted a sealed presentation (not a face-to-face one), the second one will be a direct presentation. On the basis of the sealed presentation, the ministry would shortlist a handful that will make the second and final round of presentation. It seems, the agencies have submitted the sealed presentation already. They now await the shortlist to be announced.

However, that announcement is likely to take some time. But the wait is worth the while, given the prestige factor associated with the account. That is over and above the size of the account.

Just to give an idea about VAT, it is a general consumption tax assessed on the basis of the value added to goods and services. It is a general tax that applies, in principle, to all commercial activities involving the production and distribution of goods and the provision of services, which is borne ultimately by the end consumer. VAT is charged as a percentage of price, which means that the actual tax burden is visible at each stage in the production and distribution chain. Thereby ushering in complete transparency in the taxation system.

While VAT is being fiercely debated, the benefits are enormous. It eliminates the cascading effect of taxes, it promotes competitiveness of exports, it has a simple and transparent structure, and it improves compliance, say experts.

For this reason, there are more than 120 countries in which VAT is in force currently. The US and India are among the more populous countries that do not have a VAT. In India, an Empowered Committee of the Finance Ministers of the States has been constituted for the purpose of implementing a nationwide state-level VAT. © 2003 agencyfaqs!