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“Lack of incentives for new industries will curtail growth”

Staff Reporter

ICAI seminar on value added tax held in Puducherry

PUDUCHERRY: While the switchover to the Value Added Tax from July 1 can bring benefits to the industries due to eligibility of input tax credit on goods purchased from within the Union Territory, lack of fresh incentives for new industries will dampen the industrial growth, according to VAT consultant for many southern States S. Sridharan.

Mr. Sirdharan said that, under the VAT regime, State Governments could not give tax exemption to industries and the Union Territory would be the worst hit, as industrial scenario picked up here on long-term tax holidays.

If the Government failed to provide incentives, Puducherry would lose out to other southern States, which offered a bouquet of incentives, said in his address at a seminar on the VAT organised by Southern Indian Regional Council of the Institute of Chartered Accountants of India here on Wednesday.

Most of the southern States had granted fiscal incentives such as interest-free loan for VAT/CST paid by the unit, subsidy for pollution control equipments, interest-free loans on tax paid on construction of factories, electricity tax subsidy and concession on land registration.

Considering the fact that there were no industrial inputs locally available, and had to be purchased from outside, without the benefit of input tax credit, the industrial growth would be hampered.

Further, most of the goods produced within have to be transferred, resulting in further curtailment of the meagre input tax available, he further observed. “So it is imperative that the Government grants fiscal concessions such as interest-free loan of VAT/CST on input as well as output,” Mr. Sridharan pointed out. The Government should concentrate more on providing incentives to non-polluting industries and those not causing depletion of groundwater, he added.

Earlier, addressing the gathering, he expressed hope that, under the new tax regime, prices of fast moving consumer goods would come down due to the tax rate of 0.25 per cent fixed for annual turn over of below Rs.50 lakh.

M. Rajasekaran, Commissioner of Commercial Taxes, said that the delay in implementing the VAT was due to the existence of the CST and the high rate of impact on prices owing to it.

He said in October, the Government would review the tax rate further.

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