Madhya Pradesh cuts tax on export scheme

The Madhya Pradesh government has gone ahead with slashing commercial tax on the duty entitlement passbook (DEPB) scheme to 4.6 per cent from 9.2 per cent, despite a suggestion by the department of commercial tax not to do so.

The cut, which had been asked for by Tata International Ltd, Dewas, will result in a loss of Rs 50 crore to the state exchequer.

The department of commercial tax had suggested that a cut in commercial tax on DEPB would create a loss of Rs 20 crore and a waiver in interest on the commercial tax would put an additional financial burden of Rs 30 crore.

The commercial tax rates (now value-added tax rates) stood at 9.2 per cent (8 per cent tax and 15 per cent surcharge on the tax) before October 2003.

"The chairman of Tata International Ltd, Dewas, which is one of the largest exporters, had requested the government to slash commercial tax from 9.2 per cent to 4.6 per cent (4 per cent tax and 15 per cent surcharge on it) for the period before March 31, 2006," said a government spokesperson.

Tata International, a leather export firm, had also requested the government to waive the interest imposed on the tax for 1998-99 to 2005-2006.

The commercial tax department had raised objections and had told the state cabinet the waiver was illogical since tax-payers intentionally evaded tax and the amount was used by them. Hence, there was no logic in offering them any waiver in interest on tax, which they evaded during the said period.

However, the department had recommended waiving penalty for the cases that reached the government for consideration before September 30, 2003 since there was an ambiguity on the tax related issue. The department of finance had also agreed to the suggestions made by department of commercial tax.

"The state government has waived penalty but will levy the interest in accordance with the rules but commercial tax on DEPB has been slashed to 4.6 per cent from 9.2 per cent," said the spokesperson.