Delhi exporters criticise VAT

Our Economic Bureau

New Delhi, Jan 7: The introduction of the value added tax (VAT) system announced by the Centre will adversely affect the country’s exports, resulting in blockage of funds and eroding the profit margin of exporters, SP Agarwal, president of Delhi Exporters Association, has said.

In a statement, Mr Agarwal explained that the exporters would have to pay first the value added tax regime, which will be in place from April 1 this year, amount to suppliers immediately after procuring goods for export, creating a liquidity problem.

He further said that in view of the fierce global competition, especially from China and other neighbouring countries, a large number of domestic exporters are working on a thin profit margin of one or two per cent.

The exporters body president also wondered as to how the exporting community could get money to pay for the value added tax system.
Moreover, the exporters will not have enough working capital to continue manufacturing/trading of goods for export, Mr Agarwal added.

Already, the country’s exports are exempt from sales tax, Mr Agarwal noted and said that the government would also not be able to generate any revenue from the new tax regime and it would therefore be futile for it to collect money first and refund the same to the exporters later which going by the past practice would take an enormous time.

Mr Agarwal also opined that with the country’s share in the world market is only 0.6 per cent, the value added tax system is unlikely to help matters and in fact it will deal a blow to exports and the exporters should therefore be exempted from the system.

Mr Agarwal also pointed out that he had led a delegation to meet the Delhi finance minister Mahinder Singh Sathi to discuss the impact of the system on the country’s exports and the latter had promised to take up the matter in the next meeting of finance ministers of various states.

The Delhi Exporters Association had also brought the matter to the notice of Delhi chief minister Sheila Dixit, he stated. Mr Agarwal said that he also proposed to raise the issue in the pre-Budget meeting with Union finance minister Yashwant Sinha.