THE VAT DILEMMA

The DA-IICT college canteen is seeing lots of turmoil these days. With the new batch coming in a particular canteen has shown tremendous rise in prizes with a minimum rise of around 15% pretext being the issue of VAT and increase in the market prices. Adding to this, the canteen has got monopoly in the campus which has been primordial and every effort by the college committee is towards retaining their monopoly.

So what will the students do. Most of them came out with the idea of boycotting the canteen and most of them are really doing so. This type of behavior by daiictians is one can say really preternatural to our very nature. Whether it is successful or not only time can tell, but such type of steps creates tremendous pressure on the other canteens which do not have the muscle to handle such stress thus causing a lot of chaos.

What happens next, unable to handle the chaos, the student accepts the fact (the prize rise) and goes back to the canteen, and slowly slowly the protest dies down.

Now question arises, how these inabilities to protest against such price hike will affect me. Well for a normal middle class guy, it hits a lot. Take the case where you had been spending 1500-2000 per month on food, now you will have to spend 1800-2300 on the same food without any improvement in quality or quantity.

Now most of them say because of the VAT they have to increase the rates of the product resulting in us spending more than 500 rupees extra each month as VAT for stuffs that we are paying and the profit margin of the canteen people remaining the same.

Now question arises, what the cafeteria committee says about this or in any ways I wonder do they have a say in this case. Were they even informed before increasing the prices? They cannot procrastinate as they are the ones who are responsible for what is done in the cafeteria as such protests cannot stand the test of time. On other thoughts does the cafeteria committee exist.

Now what is VAT.? Value-added tax (VAT) is a type of sales tax. VAT is an indirect tax, in that the tax is collected from someone other than the person who actually bears the cost of the tax (namely the seller rather than the consumer).

VAT differs from a conventional sales tax in that VAT is levied on every business as a fraction of the price of each taxable sale they make, but they are in turn reimbursed VAT on their purchases, so the VAT is applied to the value added to the goods at each stage of production.

Sales taxes are normally only charged on final sales to consumers: because of reimbursement, VAT has the same overall economic effect on final prices. The main difference is the extra accounting required by those in the middle of the supply chain; this disadvantage of VAT is balanced by application of the same tax to each member of the production chain regardless of its position in it and the position of its customers, reducing the effort required to check and certify their status.

So what is the real reason behind more than 15% prize rise. Well even if we consider that the whole of VAT must be given by the consumers than also it is only 12.5 % . But what is the proof that the canteen is really accounting for all what it sells as no receipts are given. They only increased the rates one year back by around 10%. There is no reason that we must help in increasing the profit margin of the canteen.

This really puts a question mark on institutes proclivity towards free trade and monopolistic approaches which is really causing problems for us. Have anyone analyzed the profit margin of the canteen and whether increasing more than 15% is right according to the requirements in the market. Isn’t it increasing the profit percentage for that canteen and boring holes into our pockets? Why aren't other canteens following this same path?

Whatever, we need answer and we need proper organization so that there must be someone answerable and responsible for such drastic steps and of course there must be a check on such activities in the future.