Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: articles on VAT and GST in India :: VAT RATES :: ACCOUNTING STANDARD :: empanelment :: form 3cd :: due date for vat payment :: TAX RATES - GOODS TAXABLE @ 4% :: VAT Audit :: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: TDS :: Central Excise rule to resale the machines to a new company
 
 
« News Headlines »
 Notification regarding extension of last date w.r.t submission of closing stock by dealer.
 Integrated Goods and Services Tax (IGST) Rules, 2017 (As on 15.11.2017)
 Central Goods and Services Tax (CGST) Rules,2017 (As on 15.11.2017)
  101st Constitution Amendment Act, 2016
 Pr. Commissioner Of Income Tax-6 Vs. Mccain Foods India Pvt. Ltd.
 Section 10 of the Income-tax Act, 1961
 Income tax returns filing: No tax on gift received from relatives in form of cash
 Income tax returns (ITR): Here is why you need to pay higher tax on other incomes
 GST Update On Issuance Of Debit Notes And Credit Notes
 How Mutual Fund Investments Can Help Save Income Tax
 Income tax returns (ITR) filing: Why small service providers need to get this benefit

It's time to rethink excise exemptions
February, 19th 2007

Bharat Sanchar Nigam Ltds decision to evaluate its purchase options, adjusting price for available cenvat credit, has thrown a host of small scale suppliers into deep trouble.

These vendors price competitiveness depends on the excise duty (cenvat) exemption available to them owing to their small-scale status. Their buyers cannot avail of any cenvat credit for the simple reason that their produce bears no cenvat. Once buyers factor in the cenvat credit available on their purchases, a component maker from the small scale sector, which does not pay cenvat, is on par with a component maker from the organised industry that pays cenvat, as far as the duty element of the price is concerned. Cenvat credit neutralises the effect of excise exemption.

BSNL cannot be faulted on its decision. It makes perfect commercial sense. What is at fault is industrial promotion using a concession that is incompatible with the emerging tax structure. Once the economy moves fully to an integrated goods and services tax, excise duty exemption would be of use to a small scale enterprise only if it manufactures final consumption goods that are sold directly to end consumers the final consumer bears the goods and services tax and cannot claim any tax credit. Duty exemptions are positively injurious to the tax administrator, as any break in the VAT chain makes evasion easy.

Small scale vendors, whose survival has become doubtful in the wake of BSNLs new procurement policy, are also not to blame for their plight. By engaging in a manufacturing activity whose viability depended solely on excise exemption, they were only responding to official policy. When the state changes its policy on taxation, it should think through implications for its concessions and those who live by them. The state failed to do so in the present case and should clean up the mess it has created. But how?

Duty exemption is subsidy by another means. Substituting a direct subsidy for the duty exemption should do away, for the moment, with the problem created for the small producers by cenvat credit. But this is not a solution that is either desirable or sustainable in the long term. Small scale should not spell either inferior quality or inefficiency in production.

Such an ideal small-scale producer would not need subsidy. Some lines of production are best carried out in the small sector, say engineering components, while some lines of production are best carried out in the large sector. Scale economies should decide which activity is small-scale and which one is not. If someone decides to manufacture airliners in the small-scale sector, there is no reason why the government should step in to subsidise that operation with either tax exemptions or cash transfers.

Small entrepreneurs need institutional support. Better banking so that credit is available and a good credit history fetches lower interest rates. Uninterrupted power supply. Relief from the burden of corruption. Speedy administrative action. Swift enforcement of contracts. Factoring services.

Only tiny and village industries that act as vehicles for the rural economys transition away from farming deserve fiscal sops. What the government can do is to offer a short roadmap to such an overhaul of its policy of industrial promotion, starting with direct substitution of cash subsidies for duty exemptions and ending with zero subsidies after traversing through steadily whittled down subsidies and enhanced institutional support.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Web Application Development Web based Software Solution Web Application Deployment Web Application Solutions Web Application Software Development Web Application Deployment Web Application Programming Web Application Design and Development

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions