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M.R. Subramani
Vipin V. Nair

Chennai/Kochi , July 2

AFTER cardamom and pepper, it is now rubber that is being clandestinely taken out of Kerala and sold either in Karnataka or Tamil Nadu. The commodity is being taken to the neighbouring States to avoid payment of a higher rate of sales tax.

Though currently the amount of rubber being smuggled is between 50,000 tonnes and one-lakh tonnes, both consumers and traders feel it could assume dangerous proposition.

"For instance, only 12,000 tonnes of rubber is being produced in Karnataka but at least 25,000 tonnes have been sold in that State. How is that possible if rubber has not been smuggled across?" asks a user-industry source, who does not wish to be identified.

"Rubber from Kerala is being smuggled to Tamil Nadu and Karnataka because of higher sales tax. On top of this, we have to pay cess to the Rubber Board," says Mr N. Radhakrishnan, President, Cochin Rubber Merchants Association.

Currently, the sales tax in Kerala is 11 per cent and additional sales tax is 15 per cent of the tax. It thus works out to be 12.65 per cent. The cess to Rubber Board is Rs 1.50 a kg. The cess for the Rubber Board is collected on all rubber produced in the country. The cess goes towards funding the Board's activities, particularly research and development.

"In Tamil Nadu, the sales tax is eight per cent, while in Karnataka it is four per cent," says Mr Radhakrishnan.

In fact, traders say it is higher sales tax that has led to smuggling of cardamom and other spices too.

"The Kerala Government has either shut its eyes or is not bothered about the loss to its exchequer," says the source.

Big manufacturers, especially tyre makers, are worried about the trend.

"That is because small-scale industries buy the rubber from Karnataka or Tamil Nadu and as a result, we would be unable to compete with their prices in a few months time," says a tyre manufacturing industry official.

The current high prices are encouraging growers to clandestinely take out rubber from Kerala to the neighbouring States.

"At current prices that are above Rs 65 a kg for RSS-4, the 11 per cent sales tax is no incentive to sell in the State. Therefore, they are forced to sell it outside at a lower rate," the source said.

Rubber prices have sky-rocketed since the second half of May as arrivals have been hit by an early onset of monsoon, which has also affected tapping.

Lower stocks have also added to the price spurt.

One way out to avoid this could be to lower the sales tax. "The user industry has suggested to the Kerala Government that the tax can be reduced to six per cent. If that happens, then everyone stands to benefit," the source added.

State Government officials, when contacted, refused comment.

More Stories on : Rubber | Taxation | Economic Offences

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