The Hindu Business Line : Call for exempting newsprint from VAT

VAT woes
According to the INMA, any commodity, which is exempted under Cenvat should automatically qualify for exemption under State VAT.
Publishers also could not pass on the VAT burden to the readers because there was no sales tax on newspapers.

Kolkata , Aug. 11

Bringing newsprint under the value-added tax system has created a piquant situation, as majority of large newsprint units and consumers, particularly those registered by the Registrar of Newspaper Industry (RNI), are finding it difficult to neutralise the financial impact of VAT.

Newsprint remains fully exempted from Central excise under chapter 48.01 on sale to an RNI-registered newspaper establishment. It was felt by the Indian Newsprint Manufacturers Association (INMA) that any commodity, which is exempted under Cenvat should automatically qualify for exemption under State VAT. INMA has observed that a 4-per-cent VAT was imposed on newsprint instead of full exemption.

Highlighting the issue, the INMA President, Mr Raji Philip, told Business Line that he had proposed to the Indian Newspaper Society (INS) a joint move on this issue before the Union Ministry of Finance. He felt that the joint move would be effective because VAT on newsprint was affecting both manufacturers and consumers.

The INMA President felt that newsprint deserved to be in the "declared merit goods" category, similar to that of steel, under the Central Sales Tax Act, taking into account its cutting-edge role in disseminating news. In fact, newspaper sales do not attract sales tax in view of it being excluded from the definition of "goods" under Section 2(d) of Central Sales Tax Act, 1956. But, when the whole effort in the revised VAT system was brought to tax, with set offs, it is sad that the main ingredient for producing newspaper (i.e. newsprint) was being taxed. This needs a re-look, he pointed out.

Mr Philip said that INMA would not have objected to the 4 per cent VAT provided its member-units had the opportunity of availing themselves of the import tax credit against purchasing various inputs from different locations. Large manufacturers are located in States where various critical inputs required for manufacturing newsprint are not locally available. Therefore, these mills could not avail themselves of tax credit for neutralising the incidence of 4 per cent State VAT on newsprint.

Similarly, publishers also could not pass on the VAT burden to the readers because there was no sales tax on newspapers.

In the given scenario, INMA feels the best solution would be to treat newsprint as declared merit goods under the provision of CST Act.

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