Trade lobbies for lower tax on tea

The Federation of All India Tea Traders' Associations (FAITTA) feels tea continues to be excessively taxed in the proposed value added tax (VAT) regime and this will push up the cost of tea for the common man and lead to inflation.

It would like tea to be in the 4 per cent category under VAT and has urged all state governments to exercise their option to place tea in the lowest tax slab.

Should a state government decide to place tea in any higher tax classification, it would lead to a rise in the prices of tea though it is a staple item in the kitchen shelf, FAITTA cautioned.

Tea is an item that plays a significant role in the Wholesale Price Index (WPI) and is an essential item of mass consumption, being the cheapest drink.

It said VAT on tea at 12.5 per cent at multiple points, coupled with additional impact of wholesale and retail trade margins, will push up prices by nearly 16 per cent to the consumer.

The final incidence on tax on tea at present is half of this.

Tea prices may rise further of central sales tax (CST) coexists with VAT, it added.

Any rise in prices of tea will lead to a decline in consumption, forcing plantations to sack workers and hitting the livelihood of millions of workers, FAITTA warned.

Consumer Education and Research Centre (CERC) has already questioned the wisdom of placing tea in a higher tax slab and warned that introduction of VAT not only increases the cost of living and burdens the consumers at large but also has an upward inflation trend creating a situation for the consumers to move from bad to worse.

Other groups of consumers like Consumer Rights, Education & Awareness Trust (Creat) of Bangalore, Mumbai Grahak Panchayat (MGP) and All India Chamber of Consumers (AICC) have also called for the lowest tax burden on tea, FAITTA claimed.

A Creat statement addressed to the government said, "Tea being an essential commodity needs to be made available at a reasonable price and as a consumer protection group, we request you to consider keeping the tax on tea at 4 per cent."

FAITTA said higher prices and lower consumption of tea will lead to a decrease in the overall tax collected on tea sales.

Many state governments are yet finalise VAT bills.