Indian Bearing Resellers Press for Tax and Duty Reforms

The Eastern India Ball Bearing Merchants Association (EIBBMA) is proposing several changes in India's importation, customs and tax arrangements. First, the EIBBMA proposes the ad valorem customs duty on bearings be rolled back, to 10% from its current 15%. This would put bearings back on par with machinery components, rather than finished goods equipment. Second, the Association points out duties on bearings must be paid within 90 days, even though the bearings are held by customs for 180 days. They propose duty payment schedules correspond to customs warehouse hold period. Finally, EIBBMA said India's new value added tax (VAT) system and the way it is implemented across India on top of the central sales tax (CST) is inhibiting inter-state transactions. Because VAT transfers taxes evenly from manufacturer to distributor to retailer to customer, it has the effect that businesses no longer pay taxes on the bearings they purchase for resale. However, because VAT is paid by the buyer and CST is paid by the seller, the 4% CST remains an additional cost which the EIBBMA maintains is a competitive disadvantage. India adopted VAT because, based on consumption, it is seen as fairer and is far less prone to evasion. CST, on the other hand, is seen as unevenly implemented and widely prone to evasion. Even though the CST is being phased out and is scheduled to be cut from 4% to 2% in June 2006, the Indian government feels CST still brings in too much tax revenue to eliminate immediately. The problem, said EIBBMA is that with both in place, distributors are caught in the middle burdened by the 4% CST, a particular problem with inter-state transactions. EIBBMA President J. Goyal said, "This has created difficulties for inter-state transportation of goods and importing manufacturers and dealers are facing problems. It is essential to put pressure on the central government to withdraw CST immediately." The EIBBMA, founded in 1968, represents the bearing importers and resellers, primarily with customs, trade and legislative issues. The organization also recently set up a member panel to help in the creation of a West Bengal business park, dedicated to manufacturers and distributors of bearings, other types of hardware and equipment, and replacement parts.