With global economic slowdown equally affecting the industries of Assam and eating into their profits, the state's industry has strongly urged the Assam government to "do away" with Entry Tax immediately to provide them some respite.
Furthermore, the industry feels that it is "against the spirit of Value Added Tax (VAT)," and leads to double taxation as Entry Tax is not vatable.
The industry of the state has been for long demanding abolition of Entry Tax.
The Assam government presently levies entry tax on raw materials, industrial inputs and on plants and machineries used for manufacture of finished goods and it ranges from 2 per cent to 12 per cent.
It had reduced entry tax on plants and machineries for SMEs two years back.
"We strongly feel that Entry Tax is against the spirit of VAT and counter-productive as far as industrialisation of the state is concerned as the industry of the state needs to heavily depend on importing not just plants, machineries and industrial inputs but raw materials too," said RS Joshi, president of Federation of Industry and Commerce of North Eastern Region (FINER), the premier trade and industry body of Assam.
"The empowered committee on VAT had very clearly stated that once VAT is introduced entry tax would be abolished. Despite being a signatory to the White Paper brought out by the committee, our government has not yet acted on the ground," Joshi told Business Standard.
Entry Tax is leading to double taxation as the tax paid while entering the state is not vatable, or is not deducted while paying VAT by the unit.
Thus, the industry feels that Entry Tax is making it less competitive by increasing its input costs.
Citing few examples how Entry Tax overlaps with VAT, Joshi said that items like pressure vessels, concrete sleepers, iron and steel fabricated items fall under the category of 'capital goods', hence, these items need to be put under 4 per cent VAT rate; as recommended by the empowered committee on VAT.
"As per spirit of white paper on VAT released by the Empowered Committee, all industrial inputs for manufacture of finished goods should qualify for 4 per cent VAT rate," said Joshi. Joshi added that a comprehensive list of inputs should be brought out by the state government or all inputs be put under 4 per cent VAT rate as per declaration by the unit.
Joshi feels that there exist great potential for widening the tax net as good number of dealers and business entities are still out of tax net in Assam, though number of registered dealers have shown remarkable growth since introduction of VAT Act. "By having a moderate tax regime and effective tax administration in place, the state can expect sustainable good revenue growth," added Joshi.
As per official figures, introduction of VAT in Assam has resulted in about 20 per cent average annual growth in tax collection, except for the present declining trend owing to economic slowdown. The industry of Assam has also demanded a Rs. 10,000 crore 'stimulus package' from the state government to offset the impact of economic slowdown and help the economy.
