The Hindu Business Line : Tea industry, trade seek 4 pc VAT

TAXATION of tea continues to be a burning issue for both the industry and the lawmakers. The domestic tea industry's attempts to get the value added tax (VAT) rate on tea to be pegged at 4 per cent has almost come a cropper, with most States keen on 12.5 per cent VAT on loose tea/packed tea sold to consumers.

The tea industry has been waving the "drink of the common man" card to drive home the message that tea should be subjected to VAT of 4 per cent and not 12.5 per cent. India produces more than 800 million kilograms of tea in a year.

"The main issue is that 26 of the 28 State Finance Ministers are keen that the VAT on tea be pegged at 12.5 per cent. Only two States (which are also tea producing States) have suggested lower rates. If the dominant view is to have 12.5 per cent rate for tea, then you can understand the difficulty in moving support to 4 per cent," Mr Ramesh Chandra, Secretary, Empowered Committee of State Finance Ministers on VAT, told tea traders and industry representatives at a PHDCCI meeting on VAT held here recently.

Citing the inflationary impact of increased incidence of tax on tea, the Federation of All India Tea Traders' Association had in a recent letter to Dr Asim Dasgupta, Chairman of the Empowered Committee of State Finance Ministers on VAT, said that the proposed 12.5 per cent VAT on tea would enhance the prices at the retail stage for the consumer by 8-10 per cent per kg i.e., (Rs 10 to Rs 20 per kg)

"The hike in tea prices will add fuel to the inflation and adversely impact the economy. We request you to put tea under the bracket of 4 per cent and take additional steps to control the prices on tea," the letter said.