The Hindu Business Line : TN looks at revenue mop-up on tax deferral schemes

Looking ahead
Tamil Nadu Government was considering securitisation of the tax deferrals extended to large industries.
The Government also considering a `samadhan' scheme at attractive rates.
Chamber for exempting essential items like foodgrains, pulses, flour and edible oils from tax.

Chennai , June 13

The Tamil Nadu Government is exploring the option of discounting tax deferral awarded to large industries by securitising to augment its revenues, according to officials of the Tamil Nadu Commercial Taxes Department.

The Government had, to attract investments, granted incentives like deferral or waiver of sales tax, depending on the size of the investment. Companies such as Ford India, Hyundai Motor India and Saint-Gobain Glass India, and some Indian companies had availed themselves of these benefits. Some opted for waiver of sales tax, which was valid for seven years, and others for deferral, which would be available for 14 years. That is, the companies opting for the deferral scheme would pay sales tax in the 15th year for the sales effected in the first year.

At an interaction with members of the Federation of Indian Chambers of Commerce and Industry (FICCI) on Tuesday, officials said that the Tamil Nadu Government was considering securitisation of the tax deferrals extended to large industries. This means that the companies would have to pay the deferred sales tax amount, which they now treat as an interest-free loan, earlier than scheduled at a discounted rate.

Large companies such as automobile manufacturers had been given 14-year sales tax deferrals. These would be in effect for another five or more years, and to augment its revenue the State Government considered discounting these deferrals, they said.

Request for `Samadhan'

The Government also considered announcing a `samadhan' scheme at attractive rates.

Industry representatives had suggested a new `samadhan' scheme to expedite tax collections under dispute.

Call for VAT

Industry representatives wanted a shift to value-added tax (VAT) system from the present general sales tax regime. The associations that participated in the meeting included the South India Small Spinners Association, Tamil Chamber of Commerce and Industry, and the Southern Indian Mills Association. They said that business had been affected by the delay in shifting to VAT.

Ms S. Malathi, Commissioner, Tamil Nadu Commercial Taxes, said that the Government had still not taken a policy decision on the introduction of VAT.

The spinners said that marketing had been affected because the neighbouring States had shifted to VAT while Tamil Nadu had kept it in abeyance.

The Tamil Chamber said that in the absence of VAT, trade had been severely affected. Absence of input tax facility as provided in VAT and levy of additional sales tax, resale tax, surcharge under the prevailing system are forcing industries to move out of the State.

However, the Tamil Chamber said that essential items like foodgrains, pulses, flour and edible oils should be exempted from tax. The tax exemption limit should be Rs 10 lakh turnover a year. Traders' representatives from foodgrains, chillies and pulses trades urged the State Government to exempt their products from tax when it chose to move to VAT.