SIKKIM CHAMBER OF COMMERCE
MG.ROAD, GANGTOK , SIKKIM 737101
10 MAY 2009
The Secretary
Finance, Expenditure & Revenue Department
Government of Sikkim
Gangtok, Sikkim 737101
Hon’ble Sir,
Sikkim Chamber of Commerce wants to draw your kind attention to the issue of Ecology & Environment Cess as under:
The business community of Sikkim was called upon to present its views on various economic issues on 29 Jan 2008 at Chintan Bhavan, Gangtok and a detailed memorandum was submitted to Honorable Chief Minister Dr Pawan Chamling.
Besides other important economic issues, we also raised issues regarding Ecology & Environment Cess duly submitting:
That the present economic order envisages larger realization with least hassles. In this context upholding the dictum “time is money” we request that the present system of collection of allied taxes like Ecology & Environment Cess be made more effective by simplification. Any Cess being essentially a tax on tax and not tax on gross should be computable relatively with any existing tax and not an independent separate tax by itself. Much of valuable time and effort on both sides could be saved if the realization is made simpler by surcharging the Value Added Tax payable by the dealer at the end of financial year in a manner that shall meet projections and targets set forth.
Taking up the issue in furtherance of sustainable growth and viable economy, this Chamber most humbly submits:
We fully appreciate the Government in this noble project and are to request simplification in administering the same making the process easier, keeping in view the targets and the projections of the revenue collection under this head.
As of now Cess is being collected on every single Sale /Purchase transactions singularly, giving effect of the levy on entire gross turnover, further requiring periodic returns to be filed separately. The system is viewed as very cumbersome, time consuming and difficult to comply in view of vast documentation required. Cess could be ascertained as a surcharge on any existing tax like VAT on annual basis at a befitting rate to match the revenue targets, such that the work load towards administration of the same and unnecessary maintenance of records by the office and the dealer both are done away with duly achieving the purpose
Further, in larger interest, may we add that:
1. Compliance of the provisions read with MRP regulations is not possible in view of various restrictions under the consumer laws. Under the MRP regime, again Cess cannot be collected from the consumer, though the Ecology and Environment Cess law directs so. Except for non MRP products, which are very few, collection from the consumer is not permitted under the MRP laws.
2. Cess in its present form tends to read as a second Sales Tax as the entire sale is in reference.
3. Much on the line of earlier sales tax system, there is a cascading effect on prices as a result of this levy.
4.In view of the latest trends of economy management/taxation/transparency and also to avoid unnecessary interpretations of class/schedule/category of goods or even terms like “sale” or “consumption”, a more realistic single slab rate would be much desirable.
5. This Chamber is to request your high office to take a new dimension with a broader perspective in achieving the targets of revenue collection as Cess by a simple process of levying a surcharge on existing tax like VAT as in the case of Education Cess being implemented by Union Government, doing away with separate registrations, filing of returns, assessments etc, the process of which is itself very taxing upon both the administrator and the dealer which could be escaped , thus realizing the same results.
We fully agree with the State Government view that more and more money is required for the development projects initiated by Government and appreciate that taxation is one of the important instrument for which citizens must contribute to the State Exchequer.
Any new tax as such would be more readily acceptable if the same contains the following features:
It should be simple to practice and administer at the same time
The law should be less cumbersome and users friendly.
The tax collection should not make the business unviable
The formalities should be simple and not lengthy and time consuming
The collection system should be such that it takes minimum time and efforts at both ends.
Further, we shall like to draw your kind attention that at the time of introduction of VAT, it was assured that no new form of taxes on sale of goods will be framed and all allied taxes like Sales tax/ Cess/ Octroi/ Toll/ shall be done away with.
As such, appreciating the dictum “the State should take so much as the bee takes Honey from flowers- Chankaya Niti”., this Chamber is to request your high office to take a new dimension with a broader perspective in achieving the targets of revenue collection as Cess by a simple process of levying a surcharge on existing tax like VAT as in the case of education cess being implemented by Union Government, doing away with separate registrations, filing of returns, assessments etc, the process of which is itself very taxing upon both the administrator and the dealer which could be escaped , thus realizing the same results.
Further, in case of distribution business the rate of 1% is very high for a distributor to pay, where the net saving varies from 1.5% to 2.5%. If this 1% Cess is levied on the net saving of a distribution business of 1.5% to 2.5%,
then, the actual rate of tax in percentage rate amounts to 40% to 60% of the net income, which is extremely high
and
which makes the whole business of distribution unviable and will lead to substantial reduction of VAT collection if the matter is not considered in the right perspective.
Further, it is difficult for a retailer to pay from his pocket 1% out of his net saving which may range from 4 to 5%. Here also the burden of Cess on retailer ranges from 20% to 25% of his net income.
It is, therefore, urgently requested that the matter be taken up in the right earnest to make the system of collection of ECOLOGY & ENVIORNMENT CESS as friendly as the noble thought itself and also be easy/simple/less time consuming and a tax on tax and not an independent tax.
The Ecology & Environment Cess should not be more than
1% OF THE VAT ( TAX ) AMOUNT
And should be charged at the end of financial year based on the VAT deposit of the dealer. This way revenue is collected for a good purpose without pinching too much the economic viability of the dealer.
With warm regards,
Yours Faithfully,
( S.K.Sarda)
President
Sikkim Chamber of Commerce
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