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GST regime: Tea Board lifts haze over auction

Tea-producing gardens, warehouses to be treated as a separate unit

Avishek Rakshit  |  Kolkata 

tea industry
The Tea Board of India on Wednesday came up with a procedural advisory to address the tea industry’s concerns on conducting auctions in the goods and services tax (GST) regime.

According to the new guidance, in case a producer ships tea from his garden or warehouse to a factory located within the same state, GST need not be paid. 

Though the garden/warehouse and the factory will be deemed as separate business units. If this same transfer is done inter-state, applicable rates of integrated GST will apply. Nevertheless, a producer can claim an input tax credit (ITC) on such transfers which will keep prices even. “The guidance has been arrived at after discussions with industry representatives and excise and sales tax officials,” an official in the Tea Board said. 

Tea producers said this would not lead to inflationary price movement. “The new guidance will definitely help in smoother transition to the GST regime. The Tea Board had consulted us and before issuing the procedures,” said Arijit Raha, secretary general of the Indian Tea Association.

The new guidelines, however, have raised scepticism among a section of the brokers. These people want the government to adopt the Tamil Nadu model at a later date.

Under the current system, a seller issues an invoice to the broker during an auction and the broker issues another invoice to the buyer.

According to the advisory, this system remains but the producer has to add the state GST and the central GST on the invoice issued to the broker. The same process will be followed when the broker bills the buyer. 

  • Intra-state transfer by the producer not to attract GST
  • Inter-state transfer to attract GST at applicable rates (input tax credit can be claimed)
  • Tax invoice may not be issued for distribution of free trade samples
  • In auctions, first the producer raises a GST compliant invoice to brokers. Brokers then, raise a similar GST compliant invoice to the buyer (input tax credit can be claimed)
  • Brokerage charges at 18% to be raised as separate invoice
  • Brokers are advised to pay the entire invoice value raised by the producer
  • Multiple producers may add the same warehouse as 'additional place of business'
  • Buyers need to declare warehouse as their place of business if they make further sale of purchased goods from that warehouse

However, a separate tax invoice from the broker at 18 per cent GST will be issued to the buyer for the brokerage services provided. “A major problem buyers will face is that while under the VAT system we were dealing with a single invoice from the broker, now, for every sale, we have to deal with multiple invoices which will be time consuming,” said Dinesh Bihani, secretary at the Guwahati Tea Auction Buyer Association.

The Tea Board has said the process followed in Tamil Nadu — direct billing system between seller and buyer (broker only signs tax invoices on behalf of the producer, if authorised) — might be adopted if required as that system was also GST compliant.

Brokers from Guwahati have questioned the rationality of this system. “Buyers don’t know producers. They know brokers from whom they buy. Why would they accept a direct buyer invoice?” a broker from Siliguri asked.

Nevertheless, the new advisory has cleared the clutter around the forthcoming auction. Earlier, the auction for Guwahati, Kolkata and Siliguri was scheduled on Tuesday (June 4) which was rescheduled to Wednesday (June 5) as “official clarity” could not be obtained. “Now that there is clarity over the auction system, we’ll participate in it on Thursday (June 6),” Ajay Garg, chairman of the Siliguri Tea Auction Committee, said.

First Published: Thu, July 06 2017. 03:10 IST