Coffee exporters unhappy with VAT

After the government issued the relief packages to the coffee growers, it is now the turn of coffee exporters to compliant. This time it is VAT.

The Indian Coffee Traders Association say that the value added tax on coffee is effecting their working capital and also adding to their interest burden.

The problem is that there is no VAT on exports. So exporters do not recover any VAT from customers which they can set off against the VAT paid by them on their purchases.

So now the exporters are demanding tax exemption. This problem has cascaded into different forms. The ICTA say that this has led to most of the traders running away from the auctions held at the Coffee Board.

"Although the money paid as tax by the exporters is refunded by the commercial taxes department every year end, it has turned out to be a drain on the working capital and adds to the interest burden. This has turned out to be a cumbersome process," said G V Krishna Rau, chairman, Coffee Board.

Meanwhile, the recently announced relief package for the debt ridden coffee growers is yet to take the shape of an official order.

According to the recent announcement by the finance ministry, the accumulated interest of Rs 287.1 crore under the special Coffee Term Loan (SCTL), announced three years ago, will be equally divide between the central government, banks and growers.

This has brought down the accumulated interest to be paid by the growers to Rs 95.7 crore. The Centre's share of interest in SCTL will be provided through an additional budgetary allocation of Rs 95.70 crore to the Department of Commerce during 2005-06, which will further be routed to the coffee board.

The growers have to pay their share of 95.7 crore by June 30, 2005 otherwise the bank will declare it as NPA.

The government has also waived the development loans given by the coffee board which amounts to Rs 64 crore including the interest.