Entry tax makes a comeback in West Bengal

The new government in West Bengal promised an optimistic outlook in its business propaganda with channel partners in Kolkata supporting the 'poriborton' with much enthusiasm.

However, after a span of 1 year, glumness seems to be prevalent among the business communities in West Bengal with echoes of 'nothing happening in the state'. Even some of the businessmen in the state have started to echo about the previous government (Left Front) being 'much better and more accessible.'

The latest blow to the misery in overall business environment in the state came this month from the government reintroducing the Entry Tax in West Bengal on April 1, 2012 after about 2 decades of abolition with the Bidhan Sabha passing the bill, ‘Tax on entry of goods into local areas bill, 2012'.

According to the bill, the tax will be imposed on movement of goods entering West Bengal from other states as well as movement of goods within the state, inclusive of imports and even goods consumed inside the state. However, agricultural products and implements have been made an exception.

The tax, according to the government will be levied on all dealers and importers and on 'any specified goods into a local area, or on the quantity or weight of any specified goods.'

Also, the tax will not be imposed on goods 'brought in the state for immediate export to destinations outside India' which has been stated as of dubious nature from most of the business associations in the state.

This bill is poised to raise the price level in secondary and luxury items by at least 1% while it claims the tax amount at not exceeding 5% (calculated on compounded wholesale price index). According to the Chief Minister of West Bengal, Mamata Banerjee, the bill will not result in pulling up the price level in the state. However, a majority of trade bodies in the state have expressed concerns over her assurance.

"Prices are bound to increase and it will be impacting IT trading as well. Now, we'll have to not only pay taxes for goods billed within Bengal, but pay for supplying to neighbouring states too," said Rajendra Seksaria, director, Balaji Solutions.

According to the proposals in the Bill, the tax will be collected through VAT collection system online and a much clearer statement over the process of collection is likely to be made public after April 13.

IT dealers and distributors in Bengal say, the reintroduction of entry tax is bound to raise overall price levels (MRP index) as well as a rise in the prices IT commodities with most of the lot likely to pass the burden of tax to the end users

"Ultimately, the increase in price has to be borne by the end-user. Although it is too early to state about the incidence of taxation and the apprehended price increase, I feel that it would raise the disparity of prices between the regions," said K.L. Lalani, chairman, Lalani Infotech.

According to channel partners in Kolkata, the tax is a direct negation of the proposed GST which has been stated to be introduced this financial year only and would deter movement of goods across state borders. Also, importers would be hit and are likely to opt for neighboring ports outside Bengal for the collection.