Left with no option after the threat by manufacturers to stop investing further in the state, the State had agreed to introduce VAT in place of the old sales tax regime. A bill replacing the Tamil Nadu General Sales Tax Act, 1959 with VAT was passed in the state assembly on December five.
Though various industry bodies and chambers had welcomed the government's move to switch over to VAT, traders association feel they would be badly hit by it.
''With Tamil Nadu becoming a manufacturing hub, the common taxation system would help the State compete in the world market,'' chambers and Industry said.
The loss to be incurred by the state as a result of the introduction of VAT was expected to be compensated by the Centre in a phased manner.
Though fears were expressed among various quarters that VAT would affect the interests of small traders, the Government allayed their fears by informing that the implementation of VAT would only help the traders. It would spare traders from remitting surcharge, recharge and additional taxes.
Disagreeing with the government's view, the Traders Association had decided to burn copies of the VAT bill, passed in the Assembly, in front of Gandhi statue on the Marina. The association also staged demonstrations in various parts of the state opposing the VAT.
The government also made it clear that introduction of VAT would not affect the small and retail traders as the concessions provided to them would continue under the VAT regime.
''Switching over to VAT will provide a common marketing and tax systems. The traders will become more competitive'', Chief Secretary L K Tripathy had said.