The exporters of Punjab are worried over the calculation of advance tax because in the first quarter itself they have suffered losses on account of strengthening of the rupee against dollar.
Speaking to Business Standard, A K Kohli,an industrialist and senior vice-president, Punjab Chamber of Small Exporters, said,The small exporters, who are operating at very low margins due to the cut-throat competition, especially from China, would be the worst sufferers due to continuous decreasing dollar. How will they pay the Advance Income Tax installment for the first quarter of 2007-08, (the advance tax is calculated on the basis of sales done in the every quarter) when the export business transacted during this quarter has already suffered net loss by more than 15-20 per cent? So small exporting companies are confused over the economic situations of their business performance due to strengthening of rupee.
The strengthening of rupee against dollar has led to a decline in the return of exports as 90 per cent of export business is negotiated in the US dollar only.
He added, During the first quarter of the financial year 2007-08, the Indian rupee has gone up by more than 10 per cent. Hence, the export business for the SME sector is becoming a story of past, particularly when small scale export companies,mainly in the northern region, have experienced 10 per cent currency conversion loss from the dollar to Re and their foreign bill remittances are indirectly under loss by more than 10 per cent.
He further added that also the steel cost alongwith other inputs has gone up during the first quarter of the current financial year by more than 10 per cent. The freight for bringing the inputs and exporting the goods has also gone up by more than 5 per cent.
In addition to the above loss, the other indirect taxes such as service tax on export goods and foreign agent commission, as well as container transportation cost have further added to the loss of small export companies by more than 20 per cent.
Thus, the net profit of the small exporting companies have gone down by nearly 20 per cent.
Gursharan Singh, another industrialist, said,The worst hit export products are in the field of engineering export like hand tools, bicycle, diesel engine and parts, nut bolts, agricultural implements, textile et al. The industries are under heavy losses in Punjab and the neighboring states and taxes are further adding to the loss of export companies ."