VAT levy: salt units see red

Salt manufacturers, many of whom are based in Gujarat, have decided to oppose the central government's decision to introduce a tax on salt for the first time since 1947, when India became independent.

At present, salt in any form is exempted from all taxes.

"Tax on salt by the British led to the Dandi Yatra under the leadership of Mahatma Gandhi. Salt is the low cost commodity is consumed by each and every person in country irrespective of status. Imposition of VAT on processed branded salt is completely unjustified."

Hiralal Parekh, president of the Indian Salt manufacturers Association (ISMA) told Business Standard.

Gandhidham produces 40 per cent of the nation's salt.

Output is estimated at 45 lakh tonne of non-refined salt in the current financial year, almost double the production in the last fiscal, because of a surge in exports to China and Japan.

If VAT is imposed on salt, units at Gandhidham would be plunged into a crisis as the VAT burden cannot be absorbed by producers who operate on wafer-thin margins, said Parekh.

Consumers will have to pay more as salt is unlike any other product in which VAT replaces existing sales tax.

Imposition of VAT on salt will mean levy of a new tax.

Small local players dominate the branded salt market in India with 60 per cent branded salt market share.

These would be hit as their salt would be more expensive that loose bulk unbranded salt sold in the country, Parasmal Nahata, vice-president of the Gandhidham Chamber of Commerce, complained.

The Prime Minister's Council (PMC) on trade and industry and the Nusli Wadia committee on food and agro industry had both recommended identical tax structures for branded and unbranded sectors.

The Parthasarathi Shome commission report on tax reform had advised against discrimination against branded salt. According to ISMA, national demand for salt is 1.20 million tonnes of which half is edible salt and the rest industrial salt. The total value of salt produced in Gujarat is around Rs 300 crore.

VAT will disrupt the salt industry in which large manufacturers source salt from the medium and small salt manufacturers, said Vikash Patel, a leading salt manufacturers at Gandhidham.