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GO sounds death knell for power equipment units

india Updated: May 04, 2007 19:52 IST
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A discriminatory trade tax policy by the Mulayam Government has pushed its own electricity industry to the brink of closure in the state.



Hundreds of units manufacturing electricity equipment and goods stand deprived of the fruit of developmental activities that spurted with the implementation of the Centre-funded Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY) and Accelerated Power Reform and Development Programme (APDRP) in the state.



Thanks to the Government Order issued around 10 months ago, there is no taker of the goods manufactured by the industrial units within the state whereas similar units outside the state are raking in moolah.



A number of representations by the state entrepreneurs have failed to cut ice with the state government which is alleged to have issued the GO to favour a particular industrial house which is taking a leading part in the RGGVY in the state and also represents the UP Development Council (UPDC).



The GO seeks to impose no tax on dozens of electricity items like transformers, cable, poles, meters, breakers, fitting equipment and the like if purchased from outside the state for RGGVY and APDRP but levies a 12 per cent tax on the same if purchased from industries within the state!



Indian Industries Association (IIA) Executive Director DS Verma told the

Hindustan Times

that the discriminatory tax in favour of the outside electricity units had ruined the industries within the state. "The small-scale electricity industry had seen a boom for itself when the state government embarked upon the Rs 3,000 crore rural electrification programme and equally ambitious APDRP for cities. The activities required electricity material in very huge quantity and number so much so that many units went for expansion. But all of them are now virtually closed," Verma regretted.



Expressing the same views, a city entrepreneur Anil Kumar Gupta, who himself runs an electricity goods manufacturing unit, said there was hardly any production now rendering hundreds of employees jobless. "The companies and contractors working for the UPPCL/Discoms on a turn key basis naturally purchase tax-free electricity material from outside the state instead of purchasing from us and pay trade tax of 12 per cent," he pointed out.



The GO issued on July 13, 2006 says, "In exercise of the powers under clause (c) of section 4 of the Uttar Pradesh Trade Tax Act, 1948 (UP Act no 15 of 1948), the Governor is pleased to exempt from payment of tax under the said Act on the sale of transformers, poles, cables, fire fighting equipment, nuts and bolts—imported from outside the state to Uttar Pradesh Power Corporation/discoms for use in RGGVY and APDRP in the state of Uttar Pradesh."



A senior trade tax officer said the GO had no parallel at least in the state's trade tax history. "Sometimes state governments attempt to impose discriminatory tax to promote their own industries at the cost of those outside the state. But such orders also, when challenged, were always quashed by the courts because the Constitution did not permit discriminatory tax," he said, adding, "But this time the state government has chosen to do 'reverse discrimination' to its industries."



A former trade tax tribunal official and law expert Keshav Dayal also said the GO did not stand judicial scrutiny. "The Constitution of India does not permit any state to levy a discriminatory tax on any goods."