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CHENNAI, May 27

THE higher sales tax on imported items levied by the Tamil Nadu Government is a disincentive to trade on a range of items and affects investments, according to Mr Mineka P. Wickramasingha, Chairman, Regional Economic Development Commission-Southern Region, of the Sri Lankan Board of Investment.

In an informal chat with newspersons here today, Mr Wickramasingha said that the higher sales tax on imported items (whose counterparts are manufactured locally) was discriminatory and against the concept of free trade envisaged under the WTO.

(The State Government amended the Tamil Nadu General Sales Tax Act in 2002 to enable levy of 20 per cent sales tax on a range of imported goods that had till then attracted a sales tax of 12 per cent or 16 per cent. The industry sees this as a discriminatory measure that adds to the cost of the product after levy of import duties.)

According to Mr Wickramasingha, Sri Lanka was adversely affected because it was an important exporter of processed foods to India. These included a wide range of bakery items and convenience foods like noodles. Chennai being their closest major market, the move hit them especially hard.

The move by the State Government also affected prospects of investments here, and was against the interest of Indian industry. The State Government should consider the global implication of such a move, he said.

Sri Lanka was looking at strengthening trade ties with India, and Tamil Nadu was its major area of interest. The Sri Lankan Export Development Board was looking at setting up an office in Chennai. A special mission to attract Indian investment in Sri Lanka was also on the anvil, he said.

Sri Lanka was interested in attracting investments in the hospitality industry, considered a major potential, and in infrastructure such as power. Indian investors were setting up projects to take advantage of the shipping facilities available there. The country was also looking at sourcing technology for value addition to its spices, a traditional industry, he said.

The Sri Lankan Government was looking at region-wise focus of economic development. Five regional councils, the Regional Economic Development Commissions, were being set up for the north, northeast, west, central and southern regions.

These are expected to emerge stronger than the Board of Investment, and an appropriate legislation is to be enacted, he said.

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