Guj auto-part dealers seek reduction in VAT

After Tata Motors parked its ‘Nano’ project in Gujarat, automobile spareparts dealers in the state are now seeking a level playing field. The dealers are demanding that the government should reduce value added tax (VAT) on auto spareparts. Currently, the dealers have to shell out 12.5per cent VAT and 2.5 per cent as surcharge which is levied on auto spareparts by the state government. The taxation amount on autopart dealers has been raised from 12.5 per cent to 15per cent in state budget for 2008-09. After hike in VAT, the auto parts traders in Gujarat claim they have lost their business to other states.

'”After removal of local tax octroi, Gujarat levies higher VAT as compared to other states as far as auto parts are concerned. West Bengal and Tamil Nadu have reduced VAT on auto parts to 4 per cent. We have also represented to Gujarat government to reduce the VAT on auto parts accordingly,” said Anil Sanghavi, President, Ahmedabad Automobiles Association. Prior to VAT implementation, CNG kits were exempted from sales tax. "However, after introduction of VAT, CNG kits were also included in 12.5 per cent tax slab and this bar has been raised to 15 per cent since last budget," he added.

The association has written a letter to the state government in this regard. Tata Group's Nano project will give new direction to state's automobiles business, but because of higher lavied tax, the trade is losing steam gradually, according to the trade body. Auto parts used to attract 8per cent sales tax, which was abolished after the implementation of VAT. Dealers are of the view that VAT must be reduced from current level if Gujarat wants to become an auto hub.