CALCUTTA, December 18: Exporters fear a fall in exports from West Bengal following the state government's recent decision to tax the premium on earnings from the sale of advance licenses within the state. Advance licenses, like special import license and duty entitlement pass book schemes, are transferable and exporters are free to sell them, which they do against a premium.

The state government has imposed a 13.2 per cent tax on this premium, which is the highest in the country. Irked by this move, the exporters feel that the state government is trying to have a piece of the cake, which was never earmarked for them. The eastern India chief of the Federation of Indian Export Organisation SS Kejriwal said that this tax is an unwanted intervention.

"The union government has given us a facility to import goods free of all duties for re-exporting purposes and for that licences are issued. Imposition of a sales tax on it is an unwanted intervention by the state government as the opportunity to earn the premium is given by the Centre," Kejriwal said. According to the exporters, the Centre is trying to work out ways of bringing the item under the purview of the central sales tax authorities and relieve the exporters. Earlier, it had tried to award security status to these licenses, but this was not possible.

"A license cannot be a security because it has a life span and does not change hands as regularly as a security or a share," an exporter said. Moreover, the countrywide tax rate varies from two to eight per cent, except in West Bengal where it is 13.2 per cent. "Tamil Nadu was the first to introduce this tax and it is eight per cent only. In Gujarat, it is lowest at two per cent, in Maharashtra it is four per cent and in Karnataka and Delhi it is seven per cent. Tamil Nadu relocates the funds collected on this account to the exporters as subsidy on some accounts and Gujarat is yet to impose it," Kejriwal said.

The chief public relations officer of the state government's sales tax department NR Chatterjee told The Financial Express that this tax was imposed from the very beginning. "With liberalisation of the Indian economy, as the Centre started allowing free imports against license we introduced this tax on the premium on selling the licenses. However, now we have started enforcing them," he said.

In Tamil Nadu, the tax was imposed during the chief ministership of J Jayalalitha and was strongly resisted by the exporters. They appealed against it before the court and the final verdict was given by the Supreme Court in favour of the state government.

The tax has been exported with retrospective effect. "When exporters sold these licenses years ago, they never took this tax into account. So now all of a sudden how will the exporters get this money?" Kejriwal asked.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.