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Tea prices likely to soar due to VAT

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Mumbai, Apr 11 (UNI) Tea prices in Maharashtra are likely to be dearer by 10-20 per cent if the State government does not come out with a notification which puts the common man's drink under four per cent VAT, instead of the 12.5 per cent effective April 1, 2006.

Tea is the only item among the essential commodities which was not put in the common VAT (value added tax) rates of four per cent under schedule-VI, and every year the State governments need to notify in schedule-II of the VAT Bill, to maintain tea under the four per cent slab.

However, Maharashtra and Andhra Pradesh failed to issue notification to this effect before commencement of the current fiscal year, leaving tea traders in the State confused who have started selling tea at a higher retail price, with 12.5 per cent VAT rate.

This has created a distortion of uniform pricing of tea across the country and is reportedly encouraging smuggling of low cost tea from the neighbouring States of Karnataka, Goa and Gujarat.

In fact, large traders under the Federation of Tea Traders Assocation of Maharashtra are now contemplating to boycot auction buying at all tea auction centres in Kolkata, Guwahati and Kochi in support of Maharahstra tea trade quota.

Mumbai Retail Tea Traders Assocation president Bhuhatrai Shah told mediapersons here today that if tea was to be classified under the general revenue neutral rate of 12.5 per cent, it would effectively double the tax incidence on an item of mass consumption.

At this rate, along with other State-level taxes like entry tax, the total effective tax burden on tea would be around 25 per cent of minimum retail price (MRP).

According to a survey, tea is consumed by 91 per cent of the country's total population, rice by 99 per cent, wheat - 97 per cent and salt by cent per cent.

Maharashtra consumes 10 per cent of annual all India tea consumption of 650 million kg, which is estimated to be a Rs 900 crore industry at retail level.

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