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Resellers call it unjustified; to meet FM

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DQC News Bureau
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IT resellers in Mumbai are disappointed over Maharashtra Government’s

amendment of the Bombay Sales Tax Act, whereby the levy of resale tax has been

increased from 0.2 percent to 0.5 percent.

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Last year, the State had introduced a resale tax of 0.2 percent on resale

turnover of goods that are liable for sales tax in excess of four percent. This

had kept IT resellers from falling in the resale tax bracket as sales tax for

most IT goods were below four percent.

Section

10 of the Bombay Sales Tax effective from 1st May 2002

(1)

There shall be levied a resale tax at the rate of 0.5 per cent., on

the turnover of resale of goods specified in Schedule ‘C’ where

the goods resold were purchased from a registered dealer, after

deducting from such turnover;

(i)

the turnover of sales of goods covered by any notification issued

under section 8A;

(ii)

the turnover of sales of goods against whom the rate of sales tax

specified in column (3) of the said Schedule is less than four per

cent;

(iii)

the turnover of sales of goods which are liable for payment of sales

tax at a rate less than four percent, by virtue of the notification

issued under section 41 and which goods are specified in Group A of

the said notification;

(iv)

the resale of goods covered by entry 37 in Part II of Schedule ‘C’;

(v)

the turnover of sales of goods, as may be notified, from time to time,

by the State Government in the official gazette;

(a)

against whom the rate of sales tax specified in column (3) of the said

Schedule is four per cent., or

(b) which are liable

for payment of sales tax at the rate of 4 per cent, by virtue of the

notification issued under section 41 and which are specified in Group A

of the said notification.

However, this year, the increased levy of 0.5 percent is being made

applicable even on goods with less than four percent sales tax. This tax will be

levied on every subsequent sale of IT products in Maharashtra.

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Resellers feel this will have a draconian effect on the price to end-user,

because often product reaches end-user after passing through a layers of four to

five dealers. "The cost of goods will increase exponentially, if goods are

taxed at every level," says Umang Mehta, President, TAIT.

According to TAIT, this kind of resale tax is not being levied in any other

state other than Maharashtra. Hence, this could lead to dealers going out of

Maharashtra to do business. "In a way, the government itself will lose

large amount of basic tax revenue," says Umang.

Representatives from TAIT will soon be meeting the State Finance Minister

Jayant Patil to seek an exemption from resale tax on IT products. Traders

believe that Maharashtra was doing well in this sector because of the reasonable

sale tax that the Maharashtra government has been imposing on IT products. Here

is what some of the resellers have to say about the resale tax that has been

imposed on their business:

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Rajiv Sethi, CEO, Liberty Automation Systems: "In a low margin industry

like ours, it is one of the most impractical and unfair thing that the

Maharashtra government could do to us. We are already paying a four percent

sales tax and over this a resale tax of three layers minimum would add another

1.5 percent. It is not justified and not a progressive step towards encouraging

IT industry in the state. I would rather ask my customers to start taking orders

from Goa or Gujarat."

Kiran Kothari, Director, Datalinker: "What else could the Government

have done. They don’t have money to pay their own staff. This was the easiest

way out to gather some money. In the process, what the Government has not

realized is that, they will be the losers in no time, because, one tier of IT

channel will get wiped out and cash business will flourish. Illegitimate

business of selling without bill will increase. This is just a precursor to the

VAT that the Government intends to bring."

Anees Khalfay, Director, Radiant Technologies: "We are already facing so

many problems and the resale tax has just added to our burden. If this tax is

imposed, one full layer of resellers will be wiped out. However, trade

representatives are meeting the finance minister and they hope to get a positive

response from the meeting."

Saifee Merchant, CEO, Best International: "If the government has to

continue this tax, they should at least remove octroi, or else Maharashtra’s

sales will go down in comparison to other states."

NELSON JOHNY, MUMBAI

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