Ref : 782/M/ dated 23 rd March To, Commissioner of Commercial Taxes Government of West Bengal 14, Beliaghata Road, Kolkatta

Transcription

1 To, Commissioner of Commercial Taxes Government of West Bengal 14, Beliaghata Road, Kolkatta Ref : 782/M/ dated 23 rd March 2009 Dear Sir RE: NOTICE U/S 66 OF WBVAT ACT REPRESENTATION Builders Association of India (BAI) have its regd. Office at Mumbai and represents the fraternity of the Construction Industry for members spread across the country. BAI have its regd. unit in Kolkatta, Durgapur and Halida. Further, BAI acts as a catalyst between members of construction industry and the Central / State Governments for various policy matters, fiscal statute, procedure & prescription etc. BAI members having business operation in West Ben gal have been served with a notice u/s 66 of WBVAT Act The format calls for a host of information which is not compatible to the accounting system adopted by the Construction Industry. Under circumstances we represent the following for your consideration and suitable advise:- 1) Construction Industry operates on variety of contract. Nature; scope and condition of each contract varies with awarder of contract. In other words it is not comparable with the uniform pattern of business either to Trader or manufacturing units. 2) Construction Industry, as a pattern of business need, controls all its operating project work on a centralized basis. In other words, the procurement of materials, execution plan, outsourcing of labour & services, administration etc. for various jobs under execution in different places or States, is controlled by a Regional Office or on centralized basis. In short the records or documents are stored at such Regional / HQ, but not with the respective project site. 3) Construction Industry, similarly, maintains pool of plant & machinery or skilled workers team, centralized design & drawing unit, large scale purchase of materials for distribution to sites etc. Under circumstances the response to the notice under reference may not be compatible in terms of the scheme of the Act as mentioned. 4) Execution of contracts by any member of Industry is normally more than one projects within any State and thus the books of a/c are maintained on centralized basis. Details of labour & service charges or others for respective contracts and further for each month, may not be feasible to meet the requirement of notice under reference. 5) Accordingly the dealer is required to file a consolidated Return, disclosing gross turnover and indicating the gross tax liability as well as availing the Input Tax Credit. In other words the Input Tax Credit is not adjusted against the output tax liability on contract-wise basis or even bill-wise, but cumulatively against the gross tax liability. Under the circumstances the requirement of notice vide col. No.4 to provide ITC details with reference to corresponding bills, sites & contracts is not compatible of response. Cont.. page 2 : 2 : 6) On the other hand, as stated above, the accounting method prescribed for Construction Industry is not similar to the one normally followed by manufacturing units but referable to Accounting Standard prescribed by Chartered

2 Accountants of India as recommended by Govt. of India. Accordingly the work done for any given month is not considered as sale price for books of a/c but work in progress, unless the status of work executed attains the designated percentage to contract price for taking the same in books of a/c as sale price. This position is also disentitle of our member from furnishing the information as required by notice under reference. 7) In view of above the requirement of notice under reference to reconcile the turnover details with final accounts, deserves reconsideration for reason it will mismatch for the above said accounting procedure. 8) Consequent to above the profit element of each contract is not ascertained either on monthly or annual basis and have to be on completion of the project, which may not be same within the same assessment period. But then a dealer is required to file monthly Returns by disclosing the turnover and working the taxable turnover taking note of profit element for the respective contracts. This position is also contrary to the need of information as per notice under reply. 9) In view of above the dealer in Construction Industry compiles their Balance Sheet on consolidated basis for all projects under execution, including the business performance relating any manufacturing or marketing activity too. In other words, either the audited Balance Sheet or P&L a/c is not compiled either on State-wise or projectwise as is the requirement of notice under reference. In view of a unique pattern of Construction Industry business and a specific method for having books of a/c i.e. Accounting Standard System, the information as required by notice under reference needs reconsideration. In the same background the scheme of VAT administration for deemed sales as per WBVAT Act 2003 also requires simplification and may be to restore Sec. 6D of Bengal Finance (Sales Tax) Act While BAI sincerely thanks you in an anticipation of your intervention, also suggests to give an appointment to representatives of BAI to render suitable clarification on the scheme of the Act relevant to Construction Industry. Yours Sincerely, CC: Sr. Joint Commissioner Central Section ITC Verification Unit 14, Beliaghata Road, Kolaktta D.L. DESAI (SHANKARBHAI) Chairman, Indian Construction Journal Committee Builders Association of India

3 PRESS RELEASE It is said that history teaches a person not to repeat wrong past acts, but Cement Industry seems to be in no mood to learn. This is evident from the fact that, in the present economic meltdown all producers have lowered price of their products save and except Cement Industry. Construction Industry is the sole consumer of cement. According to quick estimate data published by Central Statistical Organisation in January 2009, growth in the Construction Sector is likely to come down to 6.5% in compared to 9.8% in Private Industries expansion plans are on hold. Looking to the structure of Cement Industry, it is observed that top two cement producers namely Holcim Group controlling ACC and Gujarat Ambuja and Kumar Birla Group controlling Ultratech and Grasim have 40% of the all India market share. For the purpose of production, consumption and dispatches, cement industry is divided into Northern, Eastern, Southern, Western and Central Zones. About 80% of consumption in each zone is met by cement produced and supply from same zone as is evident from Table A. Table A Details of Regionwise cement consumption and inter regional movement for the year Region Consumption Dispatch received from same zone Dispatch received from other zone Qty Percentage Qty Percentage Northern Uttarakhand, Jammu and % % Kashmir, Haryana Punjab, Rajasthan, Himachal Pradesh and Delhi Eastern Assam, Meghalaya, Bihar, Jharkhand, Orissa, West Bengal, Chattisgarh Southern Andhar Pardesh, Tamilnadu, Karnataka and Kerala % % % % Western Gujarat Maharashtra % % Central Uttar Pradesh and Madhya % % Pradesh Source : Cement Statistics 2008 by C.M.A. ( 000 MT)

4 Despite identical supply position in Northern, Southern and Western Zone, price of cement bag vary greatly as per Table B. Table B Cement prices in various cities Name of Town Rate per bag in January 2009 Rate per bag in November 2008 Delhi (North Zone) 210/- 225/- Jaipur (North Zone) 170/- 182/- Mumbai (West Zone) 240/- 252/- Ahmedabad (West Zone) 210/- 220/- Mysore Bangalore (South) 250/- 250/- Hyderabad (South Zone) 190/- 220/- Chennai (South Zone) 245/- 265/- Cochin (South Zone) 250/- 270/- Bhopal (Central Zone) 206/- 195/- Jabalpur (Central Zone) 170/- 182/- Raipur (Central Zone) 190/- 210/- In Mumbai market, biggest two producers supply almost 66% cement, thus able to determine the price movement as per Table C. Name of Company Holcim Group i.e. ACC and Table C Cement off take by Mumbai in January 2009 Approx. Quantity Share in send per month Percentage M.T. 41% Gujarat Ambuja Ultratech + Grasim M.T. 22% Binani Cement M.T. 5% Laxmi Cement M.T. 5% Others M.T. 27% Total M.T. Remark Off take was M.T. to M.T. per month during April October Government of India in order to combat slowdown in economy pursuant to sub-prime crisis erupted in U.S.A. in September 2008 undertook following measures:- a) Announced two stimulus packages under which 4% reduction in Excise Duty was effected across board.

5 b) Price of petrol and diesel is brought down under two announcement by Rs.10/- and Rs.4/- per liter by 29 th January Transportation cost plays a crucial part in cement pricing. There is no change in rail freight charges on coal and cement upto average distance of 750 Km as well VAT. c) Inflation having touched peak of 12.91% in August 2008 is brought down to 5.04% by end January 2009 and expected to touch to negative 3% by March d) Reduced interest rate on individual housing loan. Construction Industry welcomes Government s concern to boost up construction, infrastructure and housing activity because of it s huge linkages with more than 100 other related industries and huge employment potential. At international level, rate of coking coal an important raw material for Steel and Cement making has come down from high of US Dollar 300 per M.T. in September 2008 to US Dollar 145 per M.T. in January Crude oil is ruling at all time low from January Economy is passing through slowdown mode. Every Industry in order to revive demand is reducing prices. Real estate or property prices which had seen stratospheric prices have come down by 25% to 30% in last four months. Steel Industry has seen price correction from Rs.48,000/- to Rs.50,000/- per M.T. during first half of the fiscal to Rs.30,000/- to Rs.32,000/- per M.T. in January 2009 and on low demand expected to slide down further. It is ironical that, in Enquiry No.RTPE 21 / 2001, MRTP Commission passed order on 29 th February 2008 as follows:- In view of our discussion above, we conclude that Respondents No.2 to 11 (except R3) acted in concert to raise the price of cement bags in Jabalpur during the months of July, December 2000 and January 2001

6 and the R1 CMA (Cement Manufacturers Association) provided a common platform to these manufacturers for the purpose. We, therefore, issue a Cease & Desist Order directing R-2 to R-11 (except R-3) to refrain from indulging in any sort of arrangement through the instrumentality of CMA or otherwise for fixing selling price of the cement in the market. We further direct them to file affidavit of compliance within eight weeks from the date of the order. BAI therefore feels that : 1. Cement export to be banned from Gujarat Ports also. 2. Delete levy of Countervailing Duty on Cement import from Pakistan. 3. Operationalise Competition Commission at the earliest. BAI, therefore request the media to project the facts and figures through your esteemed newspapers or by electronic media, so that public at large should not be taken for granted. Builders Association of India (BAI) is an apex body of Engineering Construction Contractors, founded in 1941, with 10,000 direct members through its 100+ Centres throughout the country, and indirect membership of 30,000 through Affiliated Associations. BAI is the spokesman for the Indian Construction Industry. BAI can be contacted on Tel: (022) , , Fax: bai@vsnl.com / baihq.mumbai@gmail.com.