Tea, a plantation crop, according to the draft GST Act, 2016, is not exempt from it. TAI has argued that tea plantation activity was “agricultural” in nature and about 70 per cent of industry cost consists of wages workers, which do not offer any possibility of input credits.
The current rate of VAT for tea sector is between 5-6 per cent. “Thus even if the lowest rate of 12 per cent as proposed by the Committee is applicable for tea, the tax cost on tea would be increased considerably”, TAI said.
It also apprehended that in the proposed GST regime, the states might not have the flexibility to have a different rate for teas sold through auction system thus making it less attractive.
TAI felt that any rise in tax incidence would inflate cost structure of tea production and render a negative effect on its demand affecting the economic viability of the industry. The industry was already saddled with a host of problems as well as the sustenance of the large number of workforce, TAI pointed out.