Odisha rejects plea to cut VAT on pulses

Cites poor revenue collection amid economic slowdown

The state commercial tax department has rejected the demand of traders’ to slash Value Added Tax (VAT) on pulses from 5 per cent at present to 1 per cent, citing poor revenue collection amid economic slowdown.

“In the present time, due to general recession, tax collection of the state does not show a good trend. It is a critical time for state revenue. We may wait till introduction of GST (Goods and Services Tax),” said the deputy commissioner of commercial tax to the state finance department explaining that pulses might be placed under tax exemption list under GST.

The Odisha Byabasayee Mahasangha, (Odisha Traders’ Federation) has appealed to the state government to reduce VAT on sale of pulses, citing non-levy of the tax in several other states. It argued that higher tax rate was encouraging illegal trade of pulses in the state, resulting in loss of revenue to the tune of Rs 200 crore per annum.

“As per our estimate, nearly Rs 5,000 crore transaction is made in pulses sale annually in the state. Based on 5 per cent tax structure, the state should get nearly Rs 250 crore while actual collection is less than Rs 50 crore. Therefore, the state government must reduce the rates to curb illegal trading,” said Sudhakar Panda, secretary of the trade body.

According to government data, the state collected Rs 33.74 crore as VAT from pulses sale in 2012-13, while it was Rs 27.83 crore in 2011-12,.  

As per government estimates and Agriculture department figures, the state produces nearly 400,000 tonne pulses every year. The most important pulses grown in Odisha are gram, tur, urad (biri). Production of pulses is basically concentrated in districts like Cuttack, Puri, Kalahandi, Dhenkanal, Bolangir and Sambalpur. The state sends almost two third of the production to neighbouring states.  

Trade estimates put the state’s annual pulses requirement at close to a million tonne per year. Out of this nearly 800,000 tonne is imported from states like Maharashtra, Karnataka, Uttar Pradesh and Andhra Pradesh. Of the total imported quantity, more than 100,000 tonne is imported from countries like Australia and Canada, given India’s deficiency in pulses production.

“We meet our requirement of Tur dal from Indian states, but for chick-peas (chana) and yellow peas (mattar) we depend on imports at Haldia and other ports,” said Panda.

India imports nearly 3 million tonne pulses every year to meet its annual requirement of 18 million tonne. It is the biggest producer and consumer of the food grain variety in the world.

Due to a weaker rupee and rise in demand, pulses prices are going up and the tax burden imposed by the state government is promoting illegal trading at the same time, he pointed out.

Odisha is among eight Indian states which collects VAT on pulses. With 5 per cent tax on pulses, Odisha ranks second next to Punjab where it is 5.5 per cent. The tax rates vary between 1 to 4 per cent in other states. Odisha government justified its stand on imposition of tax saying it was following guidelines of Empowered Committee (EC) of state finance ministers.

“The states which have made pulses tax free have deviated from EC guidelines,” the deputy commissioner said in his letter to the Finance department.