Spices Board seeks uniform tax rate for cardamom dealers

Unification of the tax rates of Kerala and Tamil Nadu and implementation of Kerala Valued Added Tax (KVAT) at the rate of 2 percent will help the cardamom business in Kerala. This will facilitate entry of more local dealers from Kerala besides motivating forward integration to the cardamom trade.

In a letter to the Kerala Agriculture Production Commissioner , Spices Board chairman A Jayathilak stated the marginal revenue loss in terms of reduced taxes will be more than compensated by the entry of more local traders from Kerala. The cumulative effect will be better recovery in prices to the growers in view of increased demand arising out of more bidders in the e-auction. Spices Board has planned to issue more small cardamom dealer licences to increase bidding participation in the e-auction, he sais.

 

The small cardamom industry comprises traders who are interstate buyers. Despite concentrated efforts from the board to issue more licences, around 80 percent of the dealers who participate in the e-auction are from places like Bodinaykanur, Thevaram and Cumbum in Tamil Nadu. This is due to the difference in the tax structure between the two states. The purchase of small cardamom by a dealer registered in Kerala is treated as local purchase and KVAT of 5 percent is applicable, whereas when done by a dealer registered in other state, this is treated as interstate purchase and CST at the rate of 2 percent is applicable.

Thus, the interstate buyer gets a tax benefit of around Rs 20 per kg purchased in e-auction. Considering an average purchase size of 1.5 tonne per dealer, the interstate buyer enjoys a huge price advantage of Rs 15,000 for every auction. This gives the interstate dealer a distinct competitive advantage in the small cardamom trade, he stated.

It is also observed that as the interstate purchases fall under CST, they enjoy the advantage to transfer the goods to any part of the country as ‘stock transfer to own godown’ at 0 per cent additional tax whereas the local dealers have to pay an additional 2 per cent tax for the any interstate transaction. This again gives the interstate dealer a clear edge over the dealers from Kerala.

This acts as a stumbling block to attract more dealers from Kerala. Also, the existing local dealers are finding it difficult to sustain in the industry and it is reported that some of them are facing severe losses. These grievances were raised before the state chief minister in a meeting of the stakeholders of small cardamom industry in July.

Cardamom dealers from Kerala had also informed the chief minister that they were facing difficulties for getting the KVAT refunded from the tax authorities, in case of domestic re-sale of cardamom, the letter stated.