Steel producers urge Punjab govt to slash entry tax

State levies 5%, Haryana charges 1%, Delhi and Rajasthan have no such tax

Perturbed over the high entry tax (now called advance tax) in Punjab, as compared to states like Uttar Pradesh, Haryana, Rajasthan and Delhi, iron and steel producers located outside the state feel that it is detrimental to the iron and steel-based industry in the state and urged the government to bring it on a par with the neighbouring states.

It is worth mentioning that Haryana charges one per cent entry tax on iron and steel. Recently, Uttar Pradesh has also brought it on a par with that of Haryana by reducing it to one per cent from five per cent, whereas Punjab has imposed five per cent as entry tax, the highest among the neighbouring states. Further, states like Delhi and Rajasthan have no entry tax on iron and steel produced outside the state.

Speaking to Business Standard, V R Sharma, deputy managing director and chief executive officer, Jindal Steel & Power Ltd said, “With annual consumption of five million tonnes of iron and steel, Punjab features among the states where there is high consumption. But the imposition of five per cent entry tax on iron and steel produced outside the state is detrimental to the iron and steel-based industry located within the state.” According to him, this makes the input cost higher as compared to other manufacturers which based in other states.

Primarily the iron & steel consumers in the state are auto parts, cycle & cycle parts, hand tools and engineering industries. Industrialists also added that the imposition of entry tax was also affecting their cash flows as a significant portion of working capital is blocked in form of entry tax.

According to the state government officials, if the sale of goods is within the state, the entry tax is adjusted but if it is outside the state, it cannot be reimbursed by the state.

Experts are of the view that the imposition of entry tax on iron and steel makes the input cost higher and the goods manufactured in the state become non-competitive as compared to the goods produced in other states.

Sharing his views, Cheema Boilers Director A S Cheema said, “It’s important that the manufacturers using iron and steel as raw materials procured from outside the state, should do value addition in their finished goods in order to sustain, otherwise it’s very difficult to survive in this price-sensitive market. Therefore, manufacturers need to improve their understanding of buyer values and create innovative products targeted at different customer segments.”

However, responding to industrialists’ request, Karan Avtar Singh, principal secretary, industries & commerce, Punjab, said, “The imposition of entry tax on iron and steel was done in order to promote the industry located inside the state.  We expect new capacity addition will happen in this sector and it will attract new investments.”