Kerala’s commodities sector reacted cautiously to the possible implications of GST on merchandise trade, saying that they will keenly watch taxation rates under GST.
“As tax rates have not been spelt out for the tea trade in the GST Bill, we are not in a position to reveal the exact impact on the sector,” JK Thomas, Chairman, Tea Trade Association of Cochin, told BusinessLine.
“The tax rate is very sensitive as far as the tea industry is concerned and we are hoping that tea, being an agricultural product, will be exempted from GST,” he said.
As the sector is passing through a critical phase due to low production and high wages, any rate hike will have a cascading effect on retail tea prices, impacting the survival of many SMEs, he said.
N Dharmaraj, President of the planters’ union Upasi, said plantation commodities are not being subjected to Central Excise Duty (CED) currently and that as CED is sought to be subsumed by way of imposition of Central GST, plantation commodities should be exempted from the levy of CGST.
Planters wary Plantation commodities being mass consumption items/basic goods, the rates applicable to items of basic importance should be made applicable, aligning with the prevailing VAT rate of 5 per cent, he said.
Possibilities of input credit are not available for plantation commodities at the growing stage. These commodities are grown and manufactured/processed to make them marketable and fit for human consumption/usage.
In the plantation sector, he said there is a peculiar situation wherein both growing and manufacturing (processing) are an integrated activity. The growing of plantation crops is considered agricultural activity and no input credit is allowed on goods purchased for growing and cultivation.
This implies that input taxes levied at the growing stage cannot be set off against the final product.
This, he said, would result in cascading of taxes. Upasi has urged the Finance Minister to set right this anomaly and make a seamless credit mechanism available for plantations that grow and manufacture (process) plantation crops.
Coir view PR Ajith Kumar, Director (Marketing), Coir Board, was of the view that coir and coir products should be exempted from the purview of GST in view of its environmental friendliness.
At present, the rate in Kerala is 0 per cent and there are reports that the tax structure under the GST regime is likely to be 4 per cent.
This may affect the competitiveness of coir-related products due to the cheap availability of synthetic, polypropylene, plastic products in the market.
The Cochin Oil Merchants Association has called upon the Centre and State governments to either remove or bring down taxes on coconut oil to a minimum level to benefit industry as well as coconut farmers. At present, coconut oil has been included in the category of edible oils, with a tax rate of 5 per cent. The industry wants clarity on the proposed tax rates under GST, Prakash Rao, Director, COMA, said.
Rubber industry happy “In the short-term there might be some hiccups as in the case of any paradigm shift. But in the longer term it will help industry across the board. It will improve ease of doing business and remove the current cascading of taxes. Savings in logistics costs and time will be a positive for the tyre industry as logistics, transport and tyre usage are all inter-connected,” said Rajiv Budhraja, Director-General, Automotive Tyre Manufacturers Association.
“Especially for MSMEs with meagre resources, the GST rollout will be a big positive as a lot of paperwork and resources currently employed in complying with so many layers of taxation could be saved,” added Mohinder Gupta, President, All India Rubber Industries Association.