The Hindu Business Line : AP tea trade faces VAT problem

ANDHRA Pradesh will soon lose its `tea mandi' status, built over a period of 40 years in the areas that formed part of the erstwhile Hyderabad State, if the State Government sticks to the 12.5 VAT (value-added tax) slab on tea.

Of the 21 States that have implemented VAT, only Andhra Pradesh has tea in the upper tax rate bracket, while all the others have it in the 4 per cent slab.

"This anomaly is proving dear to the industry, particularly unbranded tea," Mr Darvesh Ghiyasuddin, Chairman, Federation of All India Tea Traders' Association, and Member of the Tea Board, told Business Line.

The State recorded annual tea sales of about Rs 360 crore, with the unbranded commodity comprising 40 per cent.

Most of the business from traders in Hyderabad was being grabbed by traders across the border. "We have already lost 20 per cent of the total business in the first four months of VAT. If this continues, we will lose all of it," Mr Ghiyasuddin, who is also President of the AP Tea Merchants Association, said.

"Once we lose, there is no way we can restore it as they (buyers) get used to the new player," Mr Dilip Pandit of Silver Cloud Agencies said.

It is not just about losing buyers from outside. The State would get tea consignments, though in small numbers, from across the borders. This would mean loss of revenue to both the industry and the Government, they contended. Moreover, tea was an agricultural product, not a luxury. Citing an example, they said a few traders in Nizamabad had opened shop in Maharashtra town 30 km away. "Some buyers, traditionally our customers, will go there to buy the product at a cheaper price," they said.

Tea industry representatives had asked Mr Asim Dasgupta, Chairman of the Empowered Committee on VAT, and Mr Konathala Ramakrishna, Andhra Pradesh Minister for Commercial Taxes, to look into the anomaly and correct it. They had assured that the plea would be considered.

On the argument that the State Government could not afford to offer any concessions as VAT collections fell short of expectations, the industry representatives said the contribution of tea was just Rs 36 crore annually. "This means that it is a mere Rs 3 crore a month. Moreover, it is not going to lose all of it if it brings tea into the 4 per cent slab," they said.

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