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The
chief minister has given a routine reply of ‘according
the top priority to the issue’. The CII had also
submitted a similar memorandum few months back.
The
state government levies entry tax on the sale and purchase
of the raw and finished goods. Interestingly, entry tax is
levied at the rate of 1 per cent on all raw materials
purchased and re-imposes 2 per cent on finished goods
(made from the same raw material).
“Effectively
entry tax is levied at 3 per cent, which is totally
irrational in the present global competitive business,”
the CII said.
The
CII has pointed out that industrial units outside the
state have an edge over Madhya Pradesh industrial units
since they need not pay the 1 per cent entry tax on raw
material. “To protect the industry within the State, the
government should pay entry tax on goods purchased and
sold within the state,” the CII urged the chief
minister.
Further,
the CII has objected a state government decision to raise
entry tax from 1 per cent to 2 per cent, which is the
highest among all the states. “This has hampered the
growth of industries severely,” the CII added.
The
state government has also raised entry tax on coal from 1
per cent to 2 per cent and the CII pointed out that the
coal price itself had been increased two-folds in the last
3 years.
The
state government has also imposed a 5 per cent tax on coal
under “Madhya Pradesh Gramin Avsanrachana Sadak Vikas
Adhiniyam” with effect from 2005. “This has impacted
coal prices by almost Rs 100 per metric tonne,” the
business chamber has added.
The
further increase in the coal cost by 1 per cent on account
of increasing the rate of entry tax from 1 per cent to 2
per cent, as announced in the budget 2007-08, is making
the situation worse. It is requested to review the matter
and abolish the entry tax and additional tax of 5% on
coal, the chamber said.
Meanwhile,
tyre, tube, flaps and auto part makers have protested
against entry tax in Madhya Pradesh. In various memorandum
submitted to the state industries and commercial tax
departments and the state chief minister Shivraj Singh
Chouhan, the manufacturers have demanded immediate
abrogation of entry tax.
The
Madhya Pradesh Chapter of Confederation of Indian Industry
had raised the demand of the industry earlier but state
government paid no attention to it.
“Other
states have abrogated the entry tax after VAT regime Prior
to value added tax (VAT) regime sales tax was levied at 8%
plus 2% entry and a surcharge on it at 15% there by the
effective tax rate of 11.83 per cent on these products.
Post VAT regime the state government imposed 12.5% VAT,
after adding 2% entry tax on it, the effective rates are
as high as 14.5% on the products,” said a memorandum
submitted by a tyre manufacturer. Thus the total tax has
gone up post VAT regime effectively at 3.12% with effect
from April one 2006. “While neighbouring states namely
Rajasthan, Gujarat, Uttar Pradesh, Maharashtra and
Chhattisgarh the rate of tax is higher by only 2% on tyre,
tubes and flaps.
“The
tyre industry which is currently operating at a very thin
margin due to global competition, higher rate of tax of 2%
as above plays a very important role in the survival of
the industry,” CII has echoed industry’s demand in a
memorandum submitted to the state chief minister. The
chamber has demanded immediate withdrawal of entry tax on
sale of tyre, tube flaps in the state.
In
another similar issue the CII has pointed out that
Automobile Sector, which has been given “Thrust
Sector” sates by the Government, entry tax on Motor
Vehicle Parts was exempted through a notification issued
on April 30, 2002. “This exemption was available for
industry till 31 March 2007.The extension has not been
granted so far after 1 April 2007. “This has resulted in
levy of 1% entry tax on all motor vehicle parts,” CII
has said.
This
imposition of tax (by not extending the exemption) has
severe cost implications for the automobile sector in
manufacture or assembly of motor vehicles or major parts
thereof. “The material constitute 70 to 80% of the cost
of manufacture and therefore levy of entry tax at 1% has
increased the cost of manufacture of motor vehicles and
their parts in the state to the extent of 0.7% or more
depending on the model, value and type,” the CII added.
Add to it entry of multi-nationals in the Indian
automobile segment market has become highly competitive
and the sale prices are being decided by the market or
dependent on the competition’s sale price.
“This
naturally restricts the ability of the automobile
companies or part manufacturers, located in the state, to
pass the additional cost pressure to consumers,” the CII
said further.
So
far the department of industry and the state chief
minister secretariat have not responded to the industry in
this regard.
Source
: The Business Standard, India, dated 27/12/2007
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