Exporter's in distress with centre's proposal

Posted on    05 February 2008


The Centre proposes to request the state governments to increase the Value Added Tax(VAT) rate from 4% to 5%. This proposal has made a section of exporters a bit nervy who missed out on VAT refunds from several state governments.

The Centre, however, plans to compensate states in view of the forthcoming reduction in central sales tax (CST) rates from 3% to 2%, which is scheduled to take place from 2008-09. Though all states have agreed to refund VAT payments to exporters on a quarterly basis. The reports till date, discloses that apart from Andhra Pradesh, Gujarat, Tamil Nadu, Punjab and Maharasthra, non-payment of VAT refunds to exporters remains an acute problem in most states, especially in West Bengal and Orissa.

Based on the turnover of exports that have been despatched from the state from April 2005 to November 2007, they claim engineering goods exporters from the state have deposited around Rs 230-240 crore each year toward VAT payment, but did not get a single rupee as refund against the payment of local tax.
The same problem is being faced by other exporters from the state.

The hike in the minimum VAT rate will hurt exporters in those states where VAT refund remains unpaid since the tax was levied. It will also block more working capital funds of these exporters.

So, if the Centre raises the VAT entry rate, then the VAT due to exporters must also be refunded
Or else, the Centre should reimburse the tax to exporters by withholding the central plan allocations of the erring states, suggested EEPC.

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