Industry flays levy on bulk tea

The two per cent imposition is slated to translate into almost Rs 200 crore for the government taking into account a production of 800 million kg.quot;The removal of the eight per cent excise duty on packaged teas is a welcome step, however, the switch to a levy on bulk teas has been too expensive. Moreover, the eight per cent duty on packaged teas constituted a much smaller section ofthe tea industry, given the fact that only about 20 per cent of the entire tea production goes into packaged formquot;, said an official.It may be noted that almost 80 per cent of the total tea production is in the loose tea form. Out of this 20 per cent which carried an excise duty of 8 per cent comprised of packages over 100 grams and below 20 kgs. The industry had asked for a full waiver of the 8 per cent tax on packaged teas, which they felt was a deterrent to value addition.

The industry, critical of the move of the two per cent levy said that the high powered committee which is supposed to look into items carrying a zero duty should have talked to the industry before the imposition.

The tea industry prices have been hovering at lower levels of almost Rs 20 and Rs 30 for south and north India respectively over the corresponding period last year. With increasing costs of production, and threats of Sri Lankan imports at zero duty would seriously jeopardise the industry8217;s efforts for increasing productionand exports.

The industry has been critical on the government8217;s indifference of increasing the rate of deduction from 20 per cent to 40 per cent as part of Section 33 AB of the Income Tax Act.

The additional 20 per cent tax benefit would translate a total of 16 per cent cut in taxes for the industry. This would have been more relevant for the tea industry which carries a complicated dual taxation structure whereby 40 per cent is subjected to corporate income tax and the remaining 60 per cent is taxed by the state governments under their respective agricultural income tax acts.