Bengal govt owes Rs 300-350 cr to leather exporters as VAT refunds

The sorry state of West Bengal government's bank accounts have left the leather exporters in lurch since last five years. The state government owes close to Rs 300-350 crores to leather exporters in the state as value added tax (VAT) refund which have not been paid since last five years.

Sanjay Barmecha, a leather exporter from Kolkata, who exports bags and wallets in the European zone, says, “The entire industry's state is very bad as VAT refunds are stuck for close to last five-six years. We have not received refunds for even one year, its the same story with the rest of the exporters too. West Bengal is the only state which has not paid back VAT refunds, rest every other state pays back to its exporters. We have been trying to get an appointment with the finance department but they are not even talking to us.”

West Bengal's share in the Indian leather export basket is 16 per cent and the eastern region is expecting to cross revenue of more than Rs 2100 crore by the end of this financial year.

A senior official of the Indian Leather Products Association (ILPA),said, “VAT refund is one of the biggest hurdles in the state. It has hit the exporting community for last 4-5 years as exporters are in dire strait and funding is becoming a major issue for them. Even in Uttar Pradesh, the government has instant VAT pay back system, and the biggest problem being the state government has not cleared files, they keep sending the files back to the exporter for changes and it takes six months to get one clarification done. They are not even interested in clearing the files and giving a timeline on when they can pay us back. We have been discussing with the government but nothing has happened.”

As leather exporting comes under small and medium industry, they are depended on cash flows and family funds for running their business. Government of India has identified the leather sector as the focus sector in the Foreign Trade Policy of 2010-2014. West Bengal is the major producer of industrial gloves and finished leather products, with increase in labour and raw material costs, manufacturers are finding it difficult to stay affloat. Also, due to unavailbility of funds, leather manufacturers are finding it difficult to set up shops at the Calcutta Leather Complex (CLC) in Bantala, outskirts of the city. Tangra and Topsia region used to be the leather manufacturing belt of the city, after Supreme Court's closure order on these tanneries, SC had asked the manufactureres to set up shops at CLC at Bantala.

Though close to 200 tanneries have moved in the leather complex an equivalent amount of tanneries still exist in Tangra, say leather manufactureres.

Paresh Rajda, Regional Chairman, Eastern Region for Council of Leather Exports (CLE), said, “Some exporters have received VAT refund till 2006-2007 but since then none of the exporters have received their payments. We have been approaching the government and appealed to the finance minister that till the financial situation improves they should atleast clear the cases and stop harrasing exporters.”

Some of the smaller exporters said that they have stopped filing for refunds, it is mostly the bigger exporters who seek VAT refunds from the state.