The Basic Chemexcils, Pharmaceuticals & Cosmetics Export Promotion Council (Chemexcil) has urged the Central Government not to subject the goods required for export production under advance license/duty free license to any Central Sales Tax even if they are procured from within the country.

In a representation before the Union Finance Minister, Lalit Kumar Jain, chairman, drugs and pharmaceutical panel Chemexcil, stated that such a notification would immensely benefit the small and medium scale drug units in the country.

"The exporter manufacturer enjoys the facility of duty free advance licenses to procure inputs required for export production. Such exporters are free to import the inputs from abroad or procure the same from India under deemed exports on international prices. The manufacturer exporter, due to anomaly in central sales tax is taxed at 4 per cent against CST Form and on 10 per cent without CST Form by the state governments. Due to this, the export manufacturer prefers to buy his inputs from outside the country thereby depriving business opportunities to the local manufacturers," he explained.

Since introduction of Value Added Tax regime would have automatically solved this problem, Jain wanted the minister to issue a clarification/notification under "Para 286 (1) (b) of constitution and Parliamentary enactment C.L. (3) of Central Sales Tax Act, that central sales tax would not be applicable on inputs used for export product by manufacturer exporters on furnishing the statuary Form - H" till VAT becomes a reality.

Quoting CST Law under section 5(3) by C.I (3) insertion by Act 103 of 1976 dated 07.09. 1996 w.e.f 01.04.1976, he said that the enactment clearly indicates that the input used for the manufacture of export product is exempted from CST. "In spite of the provision in law, the notification in relation to this provision has never been issued by revenue earning department," he noted.