The announcement of Punjab deputy chief minister Sukhbir Singh Badal to remove Value Added Tax (VAT) on bicycle and its parts has not gone down well with the industry which has claimed that exemption of VAT on bicycle would negatively impact the industry.
Currently, a VAT of 6.05% is charged on bicycle and its parts in Punjab. Sukhbir during a visit to Ludhiana on Friday claimed that the state government would remove VAT on bicycle and its parts completely. Badal discussed the issue at Upkar Singh Ahuja's, general secretary of Chamber of Industrial and Commercial Undertakings (CICU), house.
However, the industry said they would not be able to get the claim of VAT on raw materials used in manufacturing of bicycle. They said the VAT should be reduced from 6.05% to 2.75% so that they could get the claim for VAT on raw material, including that of steel and nickel.
The cycle industry had been making a hue and cry for the past some time that VAT on bicycle should be decreased by the state government. However, due to different factions they were not been able to come on the same platform to discuss the issue.
Badal was immediately informed by some industry leaders that making VAT zero on bicycle would cause financial problems to the industry, thereafter, he told the business community to discuss the matter and meet him next week.
Pradeep Wadhwan, secretary, United Cycle and Parts Manufacturer Association (UCPMA), said while small units could benefit from the removal of VAT, major manufacturing units of cycles in Ludhiana would be affected due to the removal of VAT, said Wadhwan. He said the VAT should be at least 2.75% on bicycle.
Badal has asked the industry to make a presentation and discuss it with him on Thursday next week. Many industrial associations of cycle industry have started rounds of meetings to discuss the issue of VAT reduction proposed by Badal.
Federation of Industrial and Commercial Organization (FICO) discussed the issue on Saturday and said reducing VAT to zero on bicycle and its parts would not be a constructive decision. “If the state government wants to remove VAT on bicycle then VAT on raw materials should also be removed,” said Gurmeet Singh Kular, president, FICO.
Insiders said the announcement of Sukhbir Badal was not pre-planned and he did not consider technical points before he made the statement. “If VAT is removed from cycle industry, what will be the fate of Central Sales Tax (CST) on bicycle industry that also needs to be taken into consideration?” questioned an industry leader.