TN relenting on entry tax

chennai: finally, the tamil nadu government is said to be relenting its rigid stand on the entry tax issue. the government has reportedly gauged the implications of the tax for the user industry in terms of cost and competitiveness. top official sources told et, “the tax net was widened to cover more items in the current year’s budget keeping in view the need to address the problem of tax evasion. however, the tax seems to have hurt badly some of the basic industries in the state�. it is learnt that the government is convinced about the need to exempt critical raw materials and industrial inputs from the tax purview. if they are exempted, it will benefit a large section of industries in the state. tax authorities have reportedly found rationale in the argument of the user industry that the set off benefit will not be adequate to cover the additional cost structure arising out of the entry tax on raw materials and inputs which are not available in the state. moreover, this set off will apply only if the items are sold within the state. a large number of companies in the engineering and automobile sector have their markets outside the state. if they have to pay entry tax on the inputs, it will inflate their cost structure and their competitors will have a definite edge over them in the markets. industry sources said that leading companies have taken up the issue at the official level and with state finance and it minister c ponnaiyan. they have been told that the government is reconsidering the tax. the manufacturing sector as well as a section of small scale units are reeling under the impact of the entry tax ranging from 4-24 per cent imposed on iron and steel, aluminium and other inputs. it has threatened the competitiveness and survival of the engineering and automobile units, pressure cooker makers and steel re-rolling mills. the 10 per cent entry tax on paper and paper boards has also dealt a severe blow to the match units, printing press and fireworks units concentrated in sivakasi. as they are largely sourcing their requirement from outside the state, the tax burden is said to have made them uncompetitive in the domestic and export markets. tax experts have argued that the tax will severely affect the cost structure of the user industry and in a recessionary condition make them totally competitive. in karnataka, the tax on industrial inputs is limited to 1 per cent while they are exempted in madhya pradesh. while the official circles have sought to defend the impost saying that the user units having stock points will get set off benefit to the extent of sales tax, tax experts have argued it will not mitigate the units from the negative impact of the high incidence of entry tax.