Prices of yarn, powdered milk, sweetmeats, and various other items registered a steady rise in the city markets over the last one week.

The traders tried to Justify the price-rise tn the name of Value Added Tax (VAT). But. no VAT is operative at retail or wholesale levels. The VAT only replaces sales tax at import stage and excise duty on domestically produced goods and some services sectors.

Even some brands of locally manufactured cigarettes shot up. though cigarettes along with 10 other excisable Items

were spared of tlie VAT at the manufacturing stage. A packet of 20-stlck Gold Leaf.' a local brand of cigarettes, sold Saturday at the retailers level at Taka 42. up by Taka two in last two or three days.

The retail prices of cigarettes provided on example as to how a section of traders was using the VAT for raising prices.

The VAT under its existing provisions should not affect business enterprises or organ! sations with annual business turnover below Taka two lakh

They will continue to remain within the fold of business turnover tax as before.

At Narayanganj yarn market, trading stood at very thin levels after the introduction of the VAT. Reports said the yarn merchants were unwilling to sell yarn against any receipts while the bulk buyers insisted on It to take the advantages of the VAT.

The VAT provides for avoidance of tax cascading effects (or tax on taxes). Any input, used tn processing or manufac turing on which the VAT was earlier paid, are entitled to refund the paid amount of the VAT when the manufacturers or users of the inputs will pay the VAT on the final value of their output. This ensures transparency in accounts, greater tax compliance and plugging the holes responsible for tax evasion, the National Board of Revenue (NBR) sources said

They added, the areas which were earlier covered under excise duty had been brought under the VAT. The genuine business enterprises which had been paying excise duties before under the exist ing rates have nothing to lose under the VAT. they said while noting that there would be greater inducements under the VAT to file proper returns to take the benefits of the allowed refund. The VAT has been levied at a uniform rate of 15 per cent, at both importation and manufacturing stages.

According to the NBR. the VAT should not at all affect the prices of 85 per cent of the items covered under tt. At best the general price level can go up by only one per cent, thdy said.

The official sources said, no new excisable manufactured item had been included under it. All the items were subject to excise duty before, they noted without ruling out the possibilities for tax evasion under the earlier arrangements.

Asked about extension of the VAT to some new services sectors, the sources said, eight new services sectors were included under the VAT. The same thing could have been done under excise duty If the VAT was not enforced, they added.