Uttar Pradesh industries oppose tax hike

September 24th, 2008 - 6:58 pm ICT by IANS  

Lucknow, Sep 24 (IANS) The decision to hike value added tax (VAT) and re-impose entry tax in Uttar Pradesh will sound the death knell for industry, angry industrialists and businessmen in the state said Wednesday.”Coupled with poor infrastructure and all-round adverse environment, the decision of the government will prove to be the last nail in the coffin for industries,” Praveen Sadana, president of Indian Industries Association (IIA), stated at a press conference here.

Besides a substantial loss in business, the decision will also accelerate the process of industries migrating to other states that provide a better tax structure and environment, he added.

The IIA strongly condemned last week’s decision to increase VAT and and impose entry tax. VAT on computers, laptops, mobile phones, for instance, will go up from four to 12.5 percent. Additionally, there will be an entry tax of two percent on many of these items.

The hike is widely believed to have come as the government wants to collect more revenue to implement the Sixth Pay Commission’s recommendations.

“The decision to finance unproductive expenses of the establishment is illogical and the government should have pledged for better efficiency and effective compliance to increase its revenues rather than resorting to such lethal steps,” added Sadana.

Businessmen in the state who attended the conference expressed similar views.

“Instead of buying a laptop or a computer at the rate of 12.5 percent, the buyer will prefer buying the same from neighboring states at four percent tax. Does the government have any plans to compensate our losses?”, argued Rohit Kohli, president of the UP Computer Dealers Association.

Those involved in manufacturing transformers and other appliances also urged the government for damage control.

S.K. Rungta, president of the UP Transformer Industries Forum, said: “On buying the cheapest transformer (of Rs.200,000), you will now be paying Rs.17,000 as tax. And given the government’s policy of buying transformers from other states due to cheaper rates, can it assure us of giving business from its end?”

“If the increase is not withdrawn, we will be shifting our units to Uttarakhand and other neighbouring states.”

The IIA also plans to meet Cabinet Secretary Shashank Shekhar next week to apprise the government of the problems industries will face due to the tax hike.

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