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Seven weekly sales of tea have taken place since the rollout of GST. Till date, Tata Global and HLL, trade sources say “have continued to abstain from buying at the auction centres of Coonoor and Coimbatore in Tamil Nadu,” objecting to the billing system in vogue in the State.
“The absence of these two buyers has pulled down the offer rates. They used to take up to 15 to 20 per cent of the teas on offer. Their quietness has in a way impacted the competition; prices are not improving,” lamented a member of the trade association in Coimbatore.
The average price of tea dust has slipped from 90+ a kg in the first week of August last year to less than ₹90/kg — a clear drop of ₹4 to 5 a kg at the corresponding weekly sale in 2017. The slip in the leaf price was higher at around ₹10/kg from ₹86.50 (sale no 31 pertaining to 2016) to ₹76.18 at the corresponding weekly sale this year.
Meanwhile, a seller at the Kochi auction centre is learnt to have filed a writ and obtained a stay from the Kerala High Court against the billing system there. The petitioner has challenged the advisory note issued by the Tea Board. The issue arose consequent to the introduction of the Goods and Services Tax (GST).
The system followed in Kochi is for the brokers to facilitate transactions, and on finalisation (the brokers), raise tax invoices on the purchasers. In Tamil Nadu, the invoices are raised directly by the sellers without involving the brokers.
There are five stakeholders involved in the process of auctioning tea. They are the auction organisers, producers/ sellers, buyers, brokers and warehouses.
As reported earlier, a broker, per Tea Board Rules “should not either directly or indirectly engage in purchase or shipment of tea. Brokers are not owners of tea under any circumstance.”
Looking at the various provisions of the GST Act, the Court held that it did not find any prejudice to the collection of tax by direct billing or billing through a broker. “The understanding of the Board as of now is that GST requires the brokers also to raise invoices, which prima facie is not acceptable.”
“What is therefore intended by the Board is to change the essential character and status of the broker as has been laid down by the Pan India Auction Rules by an advisory note, which is not a permissible exercise,” the judge, K Vinod Chandran, said.
In Kochi, the sale of tea dust took place on Wednesday despite the stay on the present billing system. A person in the know of developments said that “though transactions took place, contracts were not issued. Auction organisers are waiting for instructions from Tea Board.”
HLL and Tata again refrained from participating in the sale.
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