Uneven Mandi tax adds to GST burden

Even as the dust kicked up by the Goods and Services tax is yet to settle, traders and companies have to face another conundrum­­ an uneven mandi tax. So wide is the discrepancy that a company procuring grain had to pay 6 per cent tax in Punjab, 4 per cent in Haryana and 0.2 per cent in Madhya Pradesh. 

Industry says this will create an imbalance in the interstate flow of crop and hurt farmers as buyers would give them a lower price to offset the tax. The All India Rice Exporters' Association (AIREA) has brought this issue with Finance Minister Arun Jaitley, requesting a uniform and minimal mandi tax across the country. 

"Though all states are signatories to the GST Act, they are levying a mandi tax which is not uniform. This goes against the `one nation one tax' vision of GST," says Vijay Setia, president, AIREA. "The effects of this variance will have a negative impact on farmers' income and will also create an imbalance in the flow of paddy from one state to another," he says. 

"In Punjab, we have to pay 6 per cent tax, including 3 per cent market fee, 0.25 per cent cancer cess and 3 per cent rural development fund when we procure basmati rice from farmers. It is Rs 1.74kg cheaper to buy from MP than Punjab. It is a huge amount considering the purchase is in lakh tonnes. The transportation cost is 70-80 paisekg so it makes sense to buy from MP," says Arvinder Pal Singh of Amar Singh Chawal Wala which sells basmati rice under Lal Qilla brand. 

Mandi tax varies across major commodities. For pulses, mandi tax in UP is 2.5 per cent, in MP it is 2.2 per cent while in Gujarat it is 0.6 per cent. In Maharashtra and AP , it is 1 per cent. "The industry will prefer a uniform tax across all mandis to have a level playing field. With the government going for electronic linkage of mandis under e-NAM, state taxes should be redundant," says Pravin Dongre, chairman, Indian Pulses & Grain Association.

Source :  The Economic Times


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