The Hindu Business Line : 20 lakh kg teas to be withheld at TN auctions

AROUND 20 lakh kg of tea valued at more than Rs 8 crore that was to be offered for sale at the forthcoming Coimbatore and Coonoor auctions, will now be set aside as a result of the CST-TNGST imbroglio. Further quantities likely to arrive for sale the week after, amounting to around 18-20 lakh kg of tea, will meet with the same fate.

For, in response to the brokers call indicating their inability to participate in the auctions, the Tea Trade Association of Coimbatore (TTAC) and the Coonoor Tea Trade Association (CTTA) have decided to suspend auctions for the forthcoming week.

The move comes in the wake of sales tax authorities slapping a recovery notice on eight leading tea brokers/auctioneers in Coonoor for tax arrears amounting to around Rs 9 crore.

Speaking to Business Line after the CTTA's emergency meeting here on Sunday, Mr O.R.M. Prabhu, Chairman, CTTA, said the association would wait for response from the Tamil Nadu authorities and then review the situation.

``It is an unjust demand and we would like it to be dropped. Why would the brokers sell or participate in auctions given the uncertainty over their past and future liabilities. If they want to consider all CST sales as TNGST let them deem it so as a futuristic measure. Tax arrears cannot be claimed with retrospective effect,'' Mr Prabhu reasoned.

Reiterating this, Mr N. Anand, Chairman, TTAC, said in effect the Government is trying to kill the goose that lays the golden egg. ``Brokers in their role as assessees, have been facilitating the Government to collect taxes in a transparent and efficient manner. To slap them with arrears will ruin them financially. We will appeal to the Government to review the matter and infuse confidence in the brokers to conduct auctions,'' Mr Anand said.

Given the current glut in the market and with tea prices under pressure, the Government's decision to claim TNGST rates for all teas sold is being perceived as sounding the death knell for the industry.

``As per the CST manual rules — which were framed in consultation with sales tax authorities — all auction sales since 1993-94 have been treated as CST sales, with brokers charged 4 per cent with `C' Form. Thus when for almost 10 years brokers have been assessed on this basis, why the sudden shift in policy,'' queries the trade body.

A moot point to be noted that in 1993-94 similar notices had been served to brokers. However once the queries raised were clarified in writing to the authorities, the brokers were assessed accordingly.

Trade sources maintain that postponement or not conducting the sale would also mean significant loss of revenue to the Government.

``The TMCO rule on proxy buying has already seen a shift in demand. But such a move will be a lot more damaging not only for the industry but also for the Government especially if teas were to move out of Tamil Nadu to the Kochi auction centre. If such a shift were to happen, it would be difficult to bring back teas to Coonoor and Coimbatore auctions,'' an auctioneer said voicing aloud another concern of the industry.

Currently, at CTTA approximately 48 per cent of teas are auctioned towards exports, 44 per cent as CST (inter state sales) and 8 per cent as TNGST. At TTAC approximately 30 per cent teas are auctioned on account of CST and 20 per cent on account of TNGST.

Trade sources also fear that suspending of auctions would bring about an adverse chain reaction, impacting the industry at every level. ``The small producer will be unable to dispose of the made tea which would probably result in the closure of small tea factories. This would mean that there would be no takers for leaf, which would place under threat the very existence of the 50,000 odd small growers,'' trade sources pointed out.

Sources said letters have already been dispatched to the Chief Minister of Tamil Nadu, the Secretary Commercial Taxes and Special Commissioner, Commercial Taxes from the trade seeking intervention in the matter.

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