| However, many states in India had imposed only 4 per cent VAT on tea and this would add to the confusion over tax set-off payments in inter-state transactions relating to tea, it added. |
| To set this right, TTAM asked that the 4 per cent VAT be imposed in Maharashtra as well. The Maharshtra government imposed the 12.5 per cent VAT levy on tea effective from April 1, 2005. Tea prices will go up by Rs 8 to Rs 15 per kg from April 15 in Maharashtra, TTAM warned. |
| Harendra Shah, president of the Federation of Tea Traders' Association of Maharashtra (FTTAM) said tea traders were shocked to note that the Maharashtra government had imposed a 12.5 per cent levy on tea under the VAT structure, even though the empowered committee of states has proposed 4 per cent VAT on tea. |
| The VAT levy should ideally be uniform all over the country and more so in the states that actually implemented the new structure. |
| Maharashtra and Andhra Pradesh have imposed 12.5 per cent VAT on tea. Himachal Pradesh and Jammu & Kashmir government were set to revise VAT from 12.5 per cent to 4 per cent on tea. |
| All other states have imposed 4 per cent VAT on tea. |
| In a memorandum sent to Jayant Patil, finance minister of Maharashtra, FTTAM pointed out that as tea was an essential commodity consumed daily, the cheapest drink and an agricultural commodity as well, it was qualified for zero per cent VAT like grains, pulses, milk powder and other commodities. |
| It said that despite the health issues concerning tobacco, it attracted only 4 per cent VAT. |
| Gold attracted only one per cent VAT. Shah said that so far, sales tax was levied only at the first point but VAT now would be levied at every stage. The consumer would have to pay more as a result. |
| There existed provisions for set-offs in the Act at the state level but inter-state transaction were not under set-off rules till date, he added. |
| No tea was grown or manufactured in Maharashtra and leaf consumed in the state came primarily from Assam, West Bengal, Tamil Nadu and Kerala. |
| Traders and tea manufacturers had stock , transfer or move tea for inter-state sales and retail sales through the distribution chain of clearing agents, sole distributors, distributors and retailers. |
| In view of this, it would be impossible to set off the tax paid in the original state under the VAT structure, Shah stated. |
| The benefit of input credit on tea products was negligible because packing material used for packing of tea or tea powder were purchased by tea blenders and packers from outside Maharashtra to avail of central sales tax benefits in some states. |
| As a result, there would be no benefit of input credit for companies manufacturing tea packets or marketing them. Shah referred to the statement of Dr Asim Dasgupta, convener of the VAT empowered committee of state finance ministers on March 7 at New Delhi that VAT on tea would be 4 per cent in all states mandatorily. |
| The necessary Parliamentary process for amendment of VAT on tea from 12.5 per cent to 4 per cent had been initiated, Dasguota had said. |
| Later, at a FICCI meeting in Kolkata on February 8, Dasgupta had repeated that VAT on tea would be 4 per cent in all states, Shah pointed out. |
| P Chidambaram, central finance minister, had also declared in Parliament on March 15 that VAT on tea would be 4 per cent. |
| Shah claimed Chidambaram had said in Parliament, "I repeat, VAT on tea will be 4 per cent in all states". |
| Shah pointed out that earlier, 8 per cent sales tax was payable on tea in Maharashtra. |
| The hike to 12.5 per cent VAT would force Maharashtra's tea traders to move to neighbouring states levying no VAT or just four per cent VAT on tea, Shah said. |
| Cheaper tea from neighbouring states would be smuggled into Maharashtra, he warned, because of the tax difference. |
| VAT on tea at 4 per cent would not cost Maharashtra any revenue loss as the central government had promised to compensate the revenue loss suffered by all states on account of VAT. |
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