The Hindu Business Line : TN sugar industry unhappy about VAT law

The new VAT Act of Tamil Nadu will render the state's sugar industry very uncompetitive, the industry says. The Act has retained the levy of purchase tax on sugarcane at Rs 60 per tonne and there is no input tax credit allowed.

"This makes the industry highly uncompetitive especially in view of fiscal incentives being given by other sugar producing states such as Uttar Pradesh," says a press release from the Southern India Chamber of Commerce and Industry (SICCI).

Senior officials of the SICCI told Business Line on Tuesday that the purchase tax was originally 1 per cent (which translates to about Rs 10 a tonne) in the VAT Bill, but was "somehow changed to Rs 60 per tonne" when the Bill was taken to the Assembly.

The Chamber says that the sugar industry is highly taxed. Purchase tax on sugarcane is only between Rs 15 and Rs 24 in other sugar producing states such as Uttar Pradesh, Maharashtra and Karnataka, whereas it is Rs 60 in Tamil Nadu.

Besides, the sales tax on molasses, at 30 per cent, is highest among all states. Similarly, for export of molasses to other states, an `export Pass Fee' of Rs 200 per tonne is levied.

Tamil Nadu being a sugar surplus state, and thus molasses surplus too, "there is no alternative but to export the commodity out of the state," the press release notes.

Accolades

"The sugar industry in Tamil Nadu is world class," it says, pointing out that the state is the third largest producer of sugar in the country, accounting for about 12 per cent of the country's output.

Sugarcane yield in Tamil Nadu is over 100 tonnes per hectare, highest in the country and compares favourably with the all-India average of 65 tonnes. Moreover, the overall sugar yield is about 10.3 tonnes per acre, only marginally lower than the world benchmark of 12 tonnes (of Australia). The all-India average yield is about 8 tonnes per acre.

"The sugar industry also contributes significantly to the coffers of the state through excise tax paid on the production of potable alcohol," the release notes.

Making out a case for reduction of tax burden on the sugar industry, the Chamber further notes that the industry is the largest provider of employment in rural areas.

The Tamil Nadu Government should pro-actively ensure that sugarcane purchase tax is reduced to about Rs 10 a tonne.

More Stories on : Sugar | Taxation | Tamil Nadu

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