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The burden of taxes on procurement of rice and wheat by Punjab and Haryana have contributed significantly to food inflation and hurt the common man the most, said the Assocham.
It also advised the Union government to develop a mechanism to be partly compensating the states to bring taxes on such items to a minimum level.
The chamber said the total taxation, including value-added tax (VAT), market fee and other charges on wheat, are the highest in Punjab (14.5 per cent), followed by Haryana (11.5 per cent). The taxation on rice is the highest in Punjab (14.5per cent), followed by Andhra Pradesh (13.5 per cent) and Haryana (11.5 per cent).
An Assocham spokesman said despite being among the largest producers of wheat and rice in the country, Punjab and Haryana have been driving out private traders from their markets because of the high tax rate on foodgrains transactions.
The high taxes in Punjab and Haryana have also increased the burden on government agencies for procurement of wheat and rice, as the latter have to procure beyond the government’s need for providing the necessary MSP (minimum support price) to farmers.
The situation has also created a problem of accumulation of stocks in both states and the constraint of finding suitable storage facilities.
ASSOCHAM says, Andhra Pradesh is the Second highest state levying 13.5% tax on rice while Madhya Pradesh levy 9.2% on wheat and UP 8.5% on wheat and 9% on rice.
The Chamber said, the state like Punjab, Haryana and Andhra Pradesh are imposing heavy burden on rice and wheat procured by state agencies/FCI which are prohibitively expensive for common public besides hindering inter-state trade in there vital daily necessities.
In Punjab, the total revenue is of the order of Rs. 38,000 crores and VAT contributes about 35% at around Rs. 14,000 crores. Neighboring Haryana State which is comparatively a smaller state has almost the same revenue at Rs. 37,300 crores but has been able to garner Rs. 16,500 croes on VAT collections.
