VIRUDHUNAGAR: Fireworks manufacturers in Virudhunagar district have been taken aback after commercial taxes officials began assessing Goods and Services Tax (GST) liability based on the quantity of raw materials used in production, instead of sales figures, triggering concern across the multi-crore industry.
Sources said more than 500 fireworks units in the district have received notices from the commercial taxes department, estimating additional GST payable by calculating the volume of chemicals purchased and used by each unit. Officials are said to have sought transaction details from chemical dealers and used these to make a tentative assessment of production and dispatch volumes.
The move has caused unease in Sivakasi, the hub of the fireworks industry, where more than 1,000 units operate across Virudhunagar district. Industry sources estimate that fireworks worth around Rs 7,000 crore were produced last year and supplied across India. During GST verification, officials reportedly found that the tax paid appeared lower than expected, prompting the current exercise.
According to sources, the notices detail the quantity of raw materials procured by individual firms, the estimated fireworks output derived from them, and the additional GST that officials believe should have been paid. Manufacturers have been asked to respond with explanations.
Fireworks unit owners argue that the method does not reflect production realities. A manufacturer said different fireworks require varying quantities of chemicals, with some using higher volumes and others much less. “It is not possible to determine the value of fireworks produced solely on the basis of chemical usage. GST liability can be accurately assessed only from the fireworks sent to the market. That has been the practice so far,” he said.
The sudden shift in assessment methodology has sparked concern across the industry, with fireworks manufacturers in Virudhunagar district reported to be planning consultations before submitting their responses to the authorities.