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BL Research Bureau

THE Indian Machine Tools Manufacturers' Association (IMTMA) has made several recommendations to the Government for reducing the ultimate tax incidence on customers and removing the anomalies in the existing tax structure.

It has sought reduction in excise duty on machine tools to 8 per cent from 16 per cent. It has also demanded `VAT-enabling' all sales tax (Central and States) levied on machine tools to avoid the cascading effect on cost of manufactured goods.

It has called for universal application of Cenvat credit to all manufacturers or refund of Cenvat, irrespective of their being within or out of the excise duty limit.

According to Mr S.G. Shirgurkar, President, IMTMA, the three-pronged approach towards reducing the incidence of tax would rectify the anomalies in the tax structure and rev up demand for manufactured goods.

According to IMTMA, the total incidence of tax worked out to 20.52 per cent of the ex-factory price for those manufacturers who are entitled to the Cenvat deduction of 16 per cent.

On the other hand, it was as high as 36 per cent for the small-scale units such as job shops, which were covered by the excise bracket.

Thus, while small-scale units, which purchased about half the machine tools produced indigenously, paid a larger percentage as taxes to the exchequer, the large manufacturers paid a much lower percentage.

Mr Shirgurkar said, "There lies a great opportunity for our policy-makers to create a larger demand for manufactured goods by reducing the tax incidence and contributing to the overall competitiveness of the industry."

He also added that a quantum increase in demand through reduced prices would lead to higher income-tax on book profits and higher revenue earnings from corporate tax would more than compensate the drop in indirect taxes.

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