'Entry tax to be death knell for industry'

The special tax on entry of certain goods which has just entered the statute books is likely to sound "the death knell" for industry in the state, according to S Chandrasekhar, president, Greater Mysore Chamber of Industries (GMCI).

GMCI feels that industry has no option but to consider moving out of Karnataka as a result of this new tax. Chandrasekhar added that large industries are already contemplating moving out of the state in view of the withdrawal of notification which provided for concessional rate of sales tax against Form 37.

"The special levy on entry tax is like adding insult to injury. GMCI strongly opposes this new levy which is not only draconian but also anti-industry and trade. We request the state government to withdraw this legislation immediately," Chandrasekhar said.

So far, entry tax was being levied on certain commodities under the Karnataka Tax on Entry of Goods Act, 1979, which was between 1 and 5 per cent, with a special rate for motor vehicles at 13.8 per cent.

In addition to this, the government of Karnataka has introduced another act which seeks to levy a special tax on entry of certain goods with effect from October 1, 2004.

The new act seeks to levy entry tax on goods brought into Karnataka at par with the sales tax rates on 23 commodities, most of which are goods of regular use by trade and industry. These include items like building materials, petroleum products, electrical and electronic goods, earthmovers, furniture, DG sets, lifts, elevators and computers.

"The act does not provide for any exemption on industrial inputs used in manufacturing, works contract, leasing, etc. Trade and Industry have for long demanding abolition of this act. Although the set off of entry tax paid is permitted on local sales of traded goods, it appears that no set off can be claimed on inter-state sales which will leave the industry high and dry," Chandrashekar said.

Industry is yet to recover from the two recent levies "" road/infrastructure cess and the sales tax hikes.

"The special tax on entry tax comes like a bolt from the blue. In view of the rationalisation of taxes in neighbouring states, a new levy like this will render industries in Karnataka totally uncompetitive," Chandrashekar added.