The Hindu Business Line : Karnataka cashew sector wants sales tax cut to 4%

In his Budget proposals recently, the Deputy Chief Minister and Finance Minister, Mr Siddaramaiah, had increased sales tax on cashew kernels from 5 per cent to 8 per cent.

The Mangalore Cashew Manufacturers' Association (MCMA), which submitted a memorandum to Mr Siddaramaiah recently, said that increase in tax rate on cashew would catalyse the growth of unorganised cashew manufacturing units at the expense of the organised ones.

This will destabilise the entire cashew industry in the State.

Terming the proposed tax rate on cashew kernels in Karnataka as one of the highest in the country, MCMA said that customers would have to pay nearly 13 per cent as tax component (including cess) while buying the processed kernels.

This is unsuitable for a commodity like cashew kernel where the profit margin is less than two per cent of the product cost.

Though the manufacturing units in Karnataka can process 1 lakh tonnes of raw cashewnuts per annum, they get only 30,000 tonnes in the State.

The rest is being imported from East and West African countries and from the neighbouring States.

Following this, the units have to spend additional amount on transportation and other related aspects.

This has made the industry unproductive in the State compared with other cashew-producing States, the memorandum said.

Even the cashew consuming States such as Delhi, Madhya Pradesh, Rajasthan and Gujarat, have levied reasonably low tax rates.

They have also de-clubbed the commodity from dry fruits.

The memorandum said that nearly 160 cashew-manufacturing units are providing employment to more than 30,000 women in the State.

The industry, which has been witnessing a growth of five to six per cent, may register 20 per cent growth and may provide employment to additional 40,000 women, provided the right environment is provided for its growth, the memorandum added.

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Karnataka cashew sector wants sales tax cut to 4%