Rubber prices down as traders cope with VAT

Domestic rubber prices were slightly down on Friday as demand fell across India, especially in the north.

The decline in demand was due to the transition period after the implementation of value-added-tax regime, market sources said. Traders would take time to adjust to the new tax structure, they said.

The Centre introduced the VAT regime on April 1, replacing the state-level sales tax, a multi-point levy on each of the entities in the supply chain.

Under the new tax regime, only the value-addition in the hands of each of the entities will be subject to tax.

"We see the slight decline in rubber prices as a temporary phenomenon. Rubber prices will come to the previous level pretty soon. Prices are likely to be flat as demand has matched supply," said Ashok Khurana, a trader with the National Multi Commodity Exchange (NMCE).

Rubber prices, which flared up in the last fortnight of March, stabilised now as the unfulfilled demand of last month was met by good supplies.

A demand had built up for the commodity as spot trading was hit by the traders' strike to protest the introduction of VAT.

Traders also resorted to hoarding as they anticipated higher profits in April with lower taxes under the value-added-taxregime. Stockpiling by traders pushed up prices.

Under the value-added-tax regime dispensation, rubber is taxed at 4 per cent from 12.5 per cent earlier.

Rubber supplies perked up in the previous week due to good rains in the rubber growing regions of Kerala, said Ketan Joshi, who also trades on NMCE.

The price of latex was little changed at Rs 39.50 per litre, exclusive of taxes.