The first tea auction after GST rollout (on July 9) proved a difficult one particularly at the two centres — Coimbatore and Coonoor — in Tamil Nadu as “there was no clear-cut instruction on the conduct of the auction” allege members of the trade.

The South India Tea Exporters’ Association (SITEA) maintained that the Tea Board had directed sale of tea through the auction at the four major centres — Kolkata, Guwahati, Siliguri and Kochi — through registered broker contracts, while the two centres in TN were directed to sell teas under sellers’ contract.

Explaining the difference between a broker contract and seller contract, Hemen Shah, Chairman, SITEA, said there were five registered licensed brokers (in South India) and a couple of more brokers in upcountry centres, who sell the teas on behalf of the producers/sellers.

After the auction, the brokers draw the invoice on behalf of the seller-brokers’ contract. In Tamil Nadu, it has been a sellers’ contract, at least over the last 6-7 years, and the trade had adjusted to the system pretty comfortably. “But under GST, when the Board directs the sale through brokers’ contract in certain centres and sellers’ contract in TN, buyers are confused because they have to maintain two different systems.”

“Moreover, major producers/sellers offer their teas at both the auction centres in TN as well as Kochi in Kerala. Having two different billing vouchers will lead to confusion and is bound to result in a mismatch for both the buyer and seller. A uniform system should be followed across all the auction centres, especially when the Board is working towards a pan India auction system,” said Shah.

A member of the broking community told BusinessLine that the billing procedure was not clear (post GST rollout). Stating that the present format is “perfect”, the broker explained that the seller/producers’ products are entrusted to the auctioneers for selling. “The invoice is prepared by us (brokers) on behalf of the seller. We don’t own the teas and this incidentally is one of the key conditions for brokers’ licence,” the broker said, preferring anonymity. The SITEA Chairman noted that there were issues of mismatch even during the earlier VAT regime and continues to remain unresolved. Trade sources said that the claims alone would amount to ₹5-6 crore.

The buying community feels that the present system is flawed as the seller/producer raises the contract on the buyer who in turn makes the payment to the broker through the settlement bank.

“The sanctity of the contract has now become a question,” a buyer said, seeking redressal from the Tea Board for smooth conduct of auction by following one billing system for the entire country. The trade is quite anxious about the outcome at the auction the coming week.

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