Financial Daily from THE HINDU group of publications
Monday, Dec 20, 2004
Industry & Economy
Knitwear & Hosiery
Continuation of CST under VAT an irritant, say hosiery units
Coimbatore , Dec.19
HOSIERY manufacturers say the continuation of the central sales tax (CST) under the value-added tax (VAT) regime to come into being effective April 1, 2005 will be an irritant to the hosiery industry.
They want the CST to be ended at the very first introduction of VAT.
"Members of the hosiery industry in the country feel that the VAT regime should replace not only the sales tax but also all other local taxes including the Octroi, entry tax and CST and we'll gladly accept the VAT implementation," said Mr Mohan P. Kandasamy, President of the Federation of Hosiery Manufacturers Association of India (FOHMA).
In a statement FOHMA, which has been a bitter critic to the amendment of the CST Act in 2002 that made `C' form based transaction compulsory for inter-State sale of hosiery products, has recalled that with the amendment, the hosiery products were affected much since the concentration of the hosiery industry is confined largely to Tamil Nadu and West Bengal.
The association has said that the CST had proved an irritant for many inter-State dealers of hosiery products who are all essentially small and tiny operators and thus it negatively impacted on the hosiery industries.
In this backdrop, the FOHMA has urged the Finance Minister to repeal the amended provision of the CST Act (Section 8) with retrospective effect from May13, 2002 and abolish the CST Act from April 1, 2005 when the VAT regime is to replace the general sales tax.
Pondy SSIs too against it
Our Chennai Bureau adds: VALUE Added Tax (VAT) and Central Sales Tax (CST) cannot coexist; simultaneous levy of both will kill inter-State trade, so CST will have to be abolished with the introduction of VAT, according to the Association of Small Industries of the Union State of Pondicherry.
A press release from the association said that with the State Governments gearing up to shift to VAT from April 2005, inter-State trade is threatened because the VAT regime does not provide for offsetting the CST levied on inter-State sales. So CST has to be abolished with introduction of VAT rather than being cut back in a phased manner as envisaged by the Centre.
Under VAT the cascading effect of tax levied from the raw material stage to the final product at each point of sale is prevented by offsetting the tax paid at the previous stage. But this does not provide for CST.
Therefore a seller located outside a state in which he sells his goods would be at a disadvantage when compared to a local supplier, the release said.
This amounts to discrimination against inter-State trade and would affect the small-scale manufacturers. At a time when markets are being thrown open to global trade, levy of CST with VAT would stifle domestic trade.
The association has urged that either CST should be abolished or like VAT, it should be made adjustable against the VAT paid in the state of origin.
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