Sugar prices in the retail market in Andhra Pradesh have increased sharply in the last few days. They have gone up to Rs 30-31 a kgfrom Rs 26- 27 last week. Wholesale traders have stopped purchases in protest against levy of 4 per cent VAT (value added tax) on sugar. This would mean a tax burden of Rs 125 on every quintal.

The Government slapped the tax with effect from July 11, 2011.

“There is no such tax in other States, particularly in Tamil Nadu, Karnataka, Orissa and Madhya Pradesh. It will be difficult to compete with our peers there,” Mr Omprakash, a representative of an ad hoc committee set up by Andhra Pradesh Sugar Traders to fight imposition of VAT, told Business Line.

The State consumes about one lakh tonnes of sugar every month, while the State capital requires 10,000 bags a day. “Sugar business is a low-margin business. We hardly get 0.5 per cent or Rs 15-20 a quintal. If we pay 4 per cent as VAT, the retail price would go up and with State borders are not far off, we might see influx of the commodity. This might go against the traders in the State,” another trader said.

Most wholesale traders have stopped purchases, resulting evaporation of stocks in retail markets. The wholesale traders argued that they could not buy sugar at higher prices.

The traders alleged that 70 per cent of all sugar consumption in the State capital was by bulk consumers such as pharma industry and confectionaries. “Levy of VAT would not impact them anyway. It is retail consumers who will have to pay the additional burden. The purpose of getting additional revenue by way of levying tax would not serve any purpose. We appeal to the Government to withdraw the tax,” Mr Omprakash said.

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