Tax anomalies may hit tool manufacturers
ANOMALIES IN the Government?s trade tax structure would soon force about 50 per cent of an estimated 2,000 small and medium scale power equipment manufacturers to shift their units to neighbouring state Uttaranchal, Vishnu Agarwal, Advisor, Indian Industries Association (IIA) said on Wednesday.india Updated: Mar 02, 2006 01:58 IST
ANOMALIES IN the Government’s trade tax structure would soon force about 50 per cent of an estimated 2,000 small and medium scale power equipment manufacturers to shift their units to neighbouring state Uttaranchal, Vishnu Agarwal, Advisor, Indian Industries Association (IIA) said on Wednesday.
Talking to reporters here, Agarwal said the manufacturers of power equipment were unable to sell their products to ‘turnkey contractors’ working for the UPPCL and other state-owned corporations on account of higher trade tax regime compared to other states.
“If the 2,000 odd manufacturers decide on shifting to Uttranchal, the State Government would lose Rs 120 crore worth of trade tax already being paid by the entrepreneurs,” he said
Already, the state government is losing Rs 300 crore worth of trade tax revenues as the ‘turnkey contractors’ executing various power projects in the State are sourcing all equipment from outside the State, ” Agarwal said.
“The Government charges 10 per cent trade tax on sale of power transformers and 13 per cent for aluminium conductors within the state. Besides, these products, turnkey contractors had also been purchasing PCC poles, line hardwares, insulators, nuts, bolts and fasteners, stay wires and earthing materials from other states,” he said.
“It is very unfortunate that the State Government has been losing revenues to the tune of Rs 3,000 crore being spent by the contractors to source key-power equipment from other states,” he said.
Moreover, there are other anomalies in the State’s tax system such as the general rate of Central Sales Tax (CST), which is being charged in the State at the rate of 4 per cent while Rajasthan and Uttaranchal charge 1 and 2 per cent respectively, said.
If the manufacturers actually move out of UP, the trade tax revenue collections would come to nought as there would be no sale of equipment worth Rs 100 to 120 crore annually in the State. This apart, the State Government would lose its share of CST when these units move out to Uttaranchal, he added.