Exporters fear heavy taxes will hurt business

Exporters fear that the Income Tax (Second Amendment) Bill 2005, recently passed by Parliament, will lead to a sharp decline in business as the Bill has proposed heavy taxes, that too with retrospective effect. According to the Bill, exporters will be taxed retrospectively on their profits for the past six years. The state expects to mop up Rs 15,000 crore from the tax.

Engineering goods exporters, who have now sought the prime minister's help for relief from the taxes, complained that despite various agitations and requests, the government had displayed a step-motherly treatment towards them by passing the Bill. They said after this decision of the government, they were not in a position to take any new orders.

The only alternative left to them was to take legal action against the government's decision by knocking on the doors of the court, said Gursharan Singh, president, Hand-tool Manufacturing Association.

"A company with a turnover of Rs 12-15 crore has to pay Rs 4 crore as tax whereas the capital investment is just Rs 80 lakh to Rs 1 crore. Thus, exporters will not be able to pay the tax and have no other alternative except to close down their businesses," said experts.

Exporters fear that those who made physical exports under the DEPB and DFRC schemes would be at the brunt of these new taxes. Traders under the burden of huge taxes would close down their businesses, as they would not be in a position to accomplish shipment orders, said Ashwini Kohli, senior vice-president, Punjab Chamber for Small Exporters.