A flaw in Maharashtra's tax structure for ready-mixed concrete has claimed a victim in RMC Readymix India. The company has announced the closure of its plant in Taloja in the state.
Any manufacturer of ready-mixed concrete, a building construction material, has to pay a sales tax of 15.3 per cent, while a works contractor producing the mixture at the site and using it for construction has to pay a mere 2 per cent tax.
This differential works out to a whopping 13.3 per cent. This has led almost all the suppliers of ready-mixed concrete to circumvent the sales tax by opting for the works contract route.
RMC Readymix India says it does not follow this practice and therefore has been forced to rework its business strategy for Maharashtra. Company officials said if this flaw is not removed it might close its shop in the state.
Readymix India managing director Mr Wilkinson said, "So many times we have brought this flaw to the notice of the sales tax authorities but they are not taking, or rather, they don't want to take any corrective action in this regard. This has left us with not much option except to close our operations here and walk out."
This is not a very healthy sign for an industry which is still in a nascent stage and needs full government support to survive. Analysts said such evasion of sales tax by almost all ready-mixed concrete companies is costing the Maharashtra a revenue loss of Rs 1 crore a month.
With the industry in its early stages this loss is likely to go up unless the government takes concrete steps to deal with the situation, they added.
An analyst with a foreign brokerage here said it is rather ironical that on the one hand the government has to resort to borrowings from other states to fund internal projects, while on the other it seems oblivious or is deliberately closing its eyes to such loss of revenue on a mass scale.
