The Hindu Business Line : VAT: Proposed tax rate on tea will be 4%

THE proposed tax rate on tea in the value added tax (VAT) regime, which is expected to take effect from April 1, will be only 4 per cent and not 12.5 per cent as decided earlier, said Dr Asim Dasgupta, West Bengal Finance Minister.

He was talking to the members of FICCI (Federation of Indian Chambers of Commerce and Industry), who were in the city on Tuesday to attend the federation's National Executive Committee meeting.

Dr Dasgupta is also the head of the Empowered Committee of State Finance Ministers who are working out the details of VAT.

According to Mr C.K. Dhanuka, Eastern Regional Chairman of FICCI, Dr Dasgupta told FICCI members that it has been decided to reduce the proposed tax rate on tea from 12.5 per cent to 4 per cent.

Mr Dhanuka, who is also the Chairman of the Indian Tea Association, welcomed the decision and said that it was a major boost to the tea industry. In fact, the industry had been lobbying hard for reducing the proposed tax.

It had been decided earlier that tea producing States would be allowed to charge 4 per cent tax on tea. But now, the national tax rate will be 4 per cent. Mr Ullas Menon, Secretary General of United Planters Association of Southern India, welcomed the decision and said it would have a positive impact on the fortunes of the tea sector.

"Everyone in the tea industry, including the producers, brokers, buyers and sellers were worried about this 12.5 per cent tax. Tea is not a luxury item. It is a common man's drink. So, ultimately the consumers will benefit from this development," Mr Menon told Business Line from Coonoor.

Industry sources said leading players in the tea industry had been contemplating to meet the Prime Minister on the issue. The Federation of All India Tea Traders Association had appointed a public relations firm to garner support against the imposition of 12.5 per cent tax.

Several other tea associations and bodies have also welcomed the decision.

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