Salt industry says no to VAT

A day before the state Budget, there is just one thing that Gujarat's salt industry is talking about "" don't implement value-added tax (VAT) on salt.

And when state finance minister Vajubhai Vala presents his Budget proposals for 2005-06, the salt industry unanimously will expect that it is excluded out of VAT.

In fact, the Central government too has a role to play in the implementation of VAT. The salt industry has also decided to disrupt the proposed Dandi yatra that the central government will organise to mark the anniversary of the historic march by Mahatma Gandhi and his followers to protest against a tax on salt.

"The actual price of a kg of salt does not add up to more than 15 paise or 20 paise, but salt pan owners have been paying tax iodisation inputs, packaging material, fuel and the like, which make salt much more costlier. In addition, if there is a VAT on the finished product, the industry will not be able to sustain the tax burden," said Bachubhai Ahir, president, Gandhidham Salt Manufacturers Association (GSMA).

Ahir added that medium and large salt units form just about 10-15 per cent of the total 5,000-odd units in the state.

"If VAT is implemented, smaller units will be hit the worst. These units manufacture, pack and even sell salt from just one place. They are actually too small to maintain records and the like. In fact, many are not even registered with the government," Ahir stated.

According to the association, the annual demand in the country for salt is 1.20 crore metric tonne, of which about 50 per cent is used domestically and the remaining is used in industries.

"Gandhidham alone accounts for 40 lakh tonne of salt and is the hub for salt manufacturing in the country," he said.

Another salt pan owner at Gandhidham, who did not want to be named, stated that if VAT is implemented, companies will simply stop selling salt to the larger companies who source it from the medium and smaller companies.

"The unit owners are anyway paying taxes for procuring packaging material, iodising and the like. A VAT will lead to many companies discontinuing supplies to larger firms," a salt pan owner said.