A day after secondary steel makers shut down their units in protest against the new tax formula, a Punjab government official today said the state is facing additional revenue loss of Rs 100 crore per year due to "massive tax evasion" taking place in iron and steel sector.
Expressing surprise over the industry's objection to new tax levying method, a senior official of the state's Excise and Taxation Department told PTI this new method was prepared with the concurrence of iron and steel makers.
"The state is facing loss in tax revenue from iron and steel sector to the tune of Rs 300 crore as against projected loss of Rs 200 crore because of slashing VAT rate," the official said.
"Then in our investigation and inspection of units, we came to know that massive tax evasion was taking place in iron and steel sector which was causing additional revenue loss of Rs 100 crore as some steel makers were still showing high consumption of electricity per tonne and hoodwinking the department," he said.
Yesterday Mandi Gobindgarh based iron and steel units, including induction furnaces, rolling mills today went on strike in protest against department's new proposal of levying tax on iron and steel items as per electricity consumption of a unit.
Punjab Excise and Taxation Department has fixed 750 units of electricity as consumption for producing one tonne (MT) of iron and steel items for industion furnaces and then charge VAT on output in order to curb tax evasion.
In a relief to secondary steel makers, Punjab government had slashed VAT rate from 4.95 per cent to 2.5 per cent on iron and steel items this year, which would have caused tax revenue loss of Rs 200 crore to the state.
A restructured VAT regime for steel makers was also launched with the consent of industry whereby there would be a minimum commitment of production of one MT of finished items with 250 units of consumption of electricity and for furnace units, a minimum commitment of 1 MT of ingot production with 750 units of electricity and VAT would be charged on actual output.
"We thought by reducing VAT, the tax compliance will go up but we found tax evasion was still going on, forcing us to carry out inspection of some units which was opposed by the industry," he said.
Meanwhile, iron and steel industry called off their strike yesterday after the state government constituting a two-member committee comprising Punjab Industry Minister Madan Mohan Mittal and Punjab Chief Parliamentary Secretary (Industry) N K Sharma to resolve the issue.
"We are asking the industry to come up with alternative mode of method of tax levy and we will implement the same provided there is no tax revenue leakage," said Punjab Chief Parliamentary Secretary (Industry) N K Sharma.
Mandi Gobindgarh, known as the steel town of Punjab, has more than 400 units including 80 induction furnaces with daily production of 12,000 MT.