Govt. urged to fix GST at 12% for cracker industry

TAMIL NADU : Tamil Nadu Fireworks and Amorces Manufacturers’ Association has said that lower rate of tax for fireworks would lead to greater realisation of revenue to the exchequer whereas higher rate of tax would result in large-scale tax evasion.

Its additional secretary S. Srinivasan urged the Centre to fix the Goods and Services Tax (GST) for cracker industry at 12% instead of 28%. Before imposition of GST, all cracker units were paying 14.5% Value Added Tax. Besides, those factories that were making an annual turnover of Rs. 1.5 crore were paying Central Excise of 12.5%. Only 42 units out of 861 players in Tamil Nadu were paying Central Excise.

Now, fixing the GST for all fireworks units at a uniform rate of 28% based on the total taxes paid by a small number of units has denied the Central Excise concession that had been extended to small-scale cracker units till now.

The GST rule says that all units with an annual turnover of Rs. 20 lakh need not pay GST. However, cracker units with such a low turnover cannot survive. So, this concession would not benefit the cracker industry, he added.

  

 

The other GST rule of paying a compounding tax of 2% for the annual turnover of less than Rs. 75 lakh, if the business is carried out within the state of production, also will not benefit the industry. Because Sivakasi remains the hub of cracker production for the entire country and units have to necessarily sell their products outside Tamil Nadu, he said.

Concession in Central Excise for SSIs with a ceiling of Rs. 30-lakh turnover was fixed in 1996-97. However, this was gradually increased up to Rs. 1 crore in 2007-08 based on inflation and increase in cost of production. As this ceiling was not proportionately increased afterwards, several families started multiple cracker units to avail themselves of the legally provided Central Excise concessions to face the stiff competition in the market, he said.

Mr. Srinivasan said that the Government had a misconception that the input credit on raw materials and services would be substantial for manufacturers and service providers. This was not true in the case of cracker industry as its raw material constituted only 30% of the total production cost and labour and administrative cost was around 70% making the industry a handicap in getting any substantial benefit out of the input credit.

Stating that there was a wide gap in 2% GST (on factories with 75-lakh annual turnover) and 28% tax (on those factories with more than 75 lakh annual turnover), he feared that no player would be interested to pay higher tax.

With all check posts in State borders removed post-implementation of GST, there is likelihood of large-scale tax evasion that would choke genuine players of the industry paying higher tax.

Source::: The Hindu, dated 10/07/2017.