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The 5 per cent GST on tea will eliminate tax incentives offered by tea-producing States of Assam and West Bengal on auction sales, according to Azam Monem, Chairman of Indian Tea Association.
Auction sales currently attract one per cent VAT (value added tax) in both Assam and West Bengal, which together contribute nearly three-fourth of the country’s 1,200-million-kg production.
The tax incentives offered by the Tamil Nadu government to bought-leaf sales also stands removed.
With green-leaf exempted from GST, small growers will continue to be outside the tax bracket. Similar exemptions will continue on storing, warehousing etc.
While planters expect gains in terms of input tax credits on consumables, many see capital block on payment of five per cent IGST for inter-State sales. The IGST would be refundable after the sale is completed in a gap of four to six weeks.
According to the GST rules, inter-State transfers are subjected to equivalent amount of IGST.
Currently planters in Assam send teas to Kolkata auction on stock-transfer basis and pay five per cent VAT on sales. In the GST regime they have to first pay the IGST and then get the tax credit.
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