The Hindu Business Line : Tea buyers' plea for lowest tax bracket under VAT regime

THE Tea Buyers' Association has urged the State Government to impress upon the Union Finance Ministry for giving the lowest tax bracket to tea in the proposed value added tax system.

Tea is the drink of common man and higher incidence of tax on such an item is not desirable, Mr R. Ramanujan, President of the Tea Buyers' Association, said while addressing the 31st annual general meeting of the Association.

It is pertinent to note the price, which is inclusive of the tax element, of a commodity like tea is determined by the market forces of demand and supply.

In a difficult market condition where the price realisation as determined by the market forces is even lower than the cost of production, a high incidence of tax is unfair, he added.

Welcoming the comprehensive packages announced by the Commerce Ministry for the revival of the tea plantation industry, Mr Ramanujan said that early formulation and speedy implementation is essential for the proposals to be effective. Concentration on quality, strong promotional efforts to access and sustain export market, free and open competition in the domestic market is essential to prevent a similar distress situation in future.

The association also demanded to abolish the controls recently imposed on trade, especially the tea auction system, saying that the controls did not have any beneficial impact. It is evident from the new Foreign Trade Policy, the strategy of the Government is to unshackle controls and create an atmosphere of trust and transparency to unleash the innate entrepreneurship of businessmen, he added.

The tea industry is poised for a turnaround and 2004 started off reasonably well. The average prices for the first half showed an improvement of Rs 3 to Rs 4 over the prices for the last two years.

The export quantity is also showing a substantial increase and there is marked improvement from the beginning of the second half with sharp price increases. Even though a lower production is expected, the gross realisations will be much higher.

He pointed out that the industry, especially in South India, has been reeling under a severe financial crisis for the past several years. Stagnant production, portion of low quality teas, sharply declining exports and un-remunerative price realisation combined with low productivity and heavy social cost on the organised tea plantation sector have made most of the industry sick.

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