The Hindu : A year of mixed fortunes for industry

Online edition of India's National Newspaper
Monday, Dec 30, 2002

Southern States

Southern States - Karnataka-Bangalore

A year of mixed fortunes for industry

By Preeti Mishra

BANGALORE Dec. 28. The Government is likely to implement Value Added Tax system by April next. Value Added Tax is the topmost item on the agenda of most people in the City's business circles. "We have to prepare our accounting reports based on VAT requirements along with Central Sales Tax guidelines which will prove to be cumbersome,'' according to a FKCCI member. Like it or not VAT is here to stay.

While 2002 has been a year of mixed fortunes across industrial segments, including IT, textiles and electronic components, the Government's decision to implement VAT will affect most of these segments. "If the Government is successful in imposing the VAT regime without any dilution and with the proposed phasing-out of the Central Sales Tax system within two years or three years, this move is sure to bolster trade, particularly allowing unhindered inter-State trade,'' Javed Basid, Past-President, Consortium of Electronics Industry of Karnataka, told The Hindu.

Undaunted by the threat of Chinese competition, the State's export-oriented electronics component manufactures had a successful year, in particular manufacturers of optical media and micro components. Likewise, local PC assemblers fared well, while manufacturers of PC-components suffered a setback, according to Mr. Basid.

Similar to the IT software services success story, the export-oriented component manufacturers too have adopted a strategy of competitive pricing, on-time delivery and quality in products.

Manandi N.Suresh, President, Bangalore Wholesale Cloth Merchants' Association, reasoned that the spurt in ready-made garments, lower consumer spending and the entry tax levied by the Government had sounded doom for the textile industry.

"The State's wholesale trade has buyers from Kerala and Tamil Nadu purchasing stock from us. The entry tax is, however, reducing the price differential and to keep it stable, vendors have had to absorb it,'' Mr. Suresh said.

With over 1,500 wholesale shops in the City, the textile industry conducted business over Rs.1,000 crores. Rationalisation of the tax structure and implementation of VAT in uniformity with other States was expected to bolster trade.

And the wish list of these industrial segments in the next year's budget: Reduce entry tax and CST.

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