Tax haunts mentha traders in UP again

The notification of the Uttar Pradesh government on Thursday approving mandi tax on mentha oil with restropective effect is expected to hit exporters and traders hard. These taxes, amounting to crores of rupees, could potentially bankrupt most of them.

The mandi tax to be imposed under the APMC Act will be 2 per cent on the basic value of mentha oil. Alongwith a development charge of 0.5 per cent it will come to a total 2.5 per cent. Apart from this, the state government will also charge an interest penalty on mentha oil traders.

The mandi tax on mentha oil was enforced in 2004 under the Samajwadi Party. However, following protests from traders, the government 'unofficially' removed it. And now with Bahujan Samaj Party in power, the mandi tax on mentha oil has been revived.

According to sources, the government is of the view that since mentha oil is an agriculture produce, it should be regulated by the APMC Act.

However, traders opine that mentha oil is a processed commodity item made from mentha leaves and should not come under the mandi tax system.

The spot market in UP reacted with a fall of Rs 17 a kg to Rs 495 a kg, down 3.32 per cent. Market sources said the situation was very volatile and prices could plummet further.

"We have no idea what the impact will be over the long term. We hope to take up the issue with the government," said one of the traders. They said they were yet to get any formal communication from the government in this regard.

This season, the country produced a surplus quantity of mentha oil. Moreover, over the last fortnight, the demand from the overseas market was almost nil.

"There are limited buyers for mentha oil. Possibly, their requirement may have been met, resulting in this dry spell," said a Chandausi-based trader.

On the National Commodity and Derivatives Exchange, the near month futures of mentha oil closed on Thursday at Rs 447 a kg against the previous close of Rs 460, down 2.83 per cent.