VAT: flour mills in a tizzy over differing definitions

Would you categorise commodities such as maida, atta and sooji as products or foodgrains?

This seems to be the question bothering some of the states. The question of the implementation of value added tax on these commodities has led to confusion in these states.

While some states have considered only wheat and rice as foodgrains, others have also included maida, atta and sooji under the purview of foodgrains category and have exempted these from VAT.

B N Mahaveer, president, Karnataka Roller Flour Mills Association (KRFMA) holds that such commodities are finished products are are thus to be taxed under VAT.

He said, "Maida, atta and sooji are not foodgrains but converted products." KRFMA has conveyed to the empowered committee on VAT that some states have exempted maida, atta and sooji from VAT whereas some states have kept the items under the 4 per cent VAT category.

While West Bengal, Delhi and Goa have a zero per cent VAT rate for maida, atta and sooji, Karnataka, Maharashtra, Punjab, Andhra Pradesh and Bihar have imposed a 4 per cent VAT rate. "Karnataka is waiting for the review meet to take a decision on this," informed Mahaveer.

In addition to maida, atta and sooji, sale of bran as animal feeds is also being impacted by this prevailing confusion. A few states are taxing branded bran and leaving the unbranded bran untaxed, he added.

V P Jayaraman, executive secretary, KRFMA, said that as a result of this duty anomaly, there is possibility of dumping of goods into Karnataka by neighbouring states like Goa, Tamil Nadu and Kerala.

"It will become difficult for our industries to compete with other states where there is zero tax VAT rate," said Jayaraman.

Dumping of maida, atta and sooji products would impact the 58 flour roller mills of Karnataka, which have a combined installed capacity of one lakh tonne per month and have capacity utilisation of only 35 per cent.