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Noida units pitch for VAT reduction to stay competitive
January, 09th 2014

To remain competitive in the market, the manufacturing units of Noida are demanding ease in the Value Added Tax (VAT) by around 2 per cent which currently stands at 14 per cent. They have opined that it would help manufacturers in the region to enhance profitability by around 2.5 per cent, which is huge for the nearly 7,000 micro-sized units operating in the region.

VK Seth, secretary general, Noida Entrepreneurs Association (NEA) said that the High VAT rates in Noida is adding to the production cost and thus reducing the profit margin of the units located here.

He said "Noida is an integral part of NCR and majority of the units operating the NCR have their markets as well as source for the raw material in Delhi. However, if we compare the VAT levied on Noida units with that of Gurgaon, it looks unfair, as it is 14 per cent in Noida while just 12.36 per cent in Gurgaon. This gap is making a huge difference in market competitiveness as such tax gap on sale of the products is providing a window of around 2.5 per cent to 3 per cent enhanced profitability margin."

Seth was of the opinion that VAT was not at this higher level. It has been enhanced from 12 per cent to 14 per cent in last four to five years, while it remained unchanged in Gurgaon.

Sudhir Srivastava, managing director, J&S Wirelinks Private Limited said, "It's not about the tax on sales of the products only. It affects our input cost too," and added, "Entire Noida is facing acute power shortage and the units operating here have no option but to go for the diesel sets. But because of this high VAT, even diesel is dearer in Noida as compared to Delhi which becomes a concern while buying in bulk."

He said that since majority of the units operating in the region have to put an extra cost on the logistics which is on an average one per cent of the net input cost. Had the VAT been same in Delhi, Noida and Gurgaon, it could have been easier for the units to buy diesel from the nearest petrol pumps.

When asked about the bulk diesel buying, done through the oil companies directly, Neeru Sharma of Harsh Enterprises said, "This bulk buying costs around ` 7 more than the normal petrol pump prices in the region. Therefore, none of the units seems interested in bulk buying direct from the companies."

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