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TN tea brokers plan split option to escape addl ST

P.S. Sundar

COONOOR, Dec. 1

TEA broking firms in Tamil Nadu operating in different centres under the same name are now planning to split their organisations into different legal entities to escape the levy of an additional sales tax (AST).

For the purposes of joint handling of teas of the same producers in different auction centres in the country, the brokers have been running their units as separate legal entities in different centres. So, while everyone in the industry knows that the units are the same, for all legal purposes, each is a different organisation. And, of course, the stake of partnership also differs from unit to unit. Thus, this gave the convenience of handling the producers' teas in different auction centres, but at the same time, the units are different legally.

But, for some broker organisations, handling of the teas at the different auction centres has now cast an unusual fiscal burden. This comes in the form of an AST.

In strict terms, the broker firms should not be covered under the sales tax at all as they do not own the teas, but are just the custodians of the teas belonging to the producers. Until 1983, the tea producers were the assesses for the sales tax and the price bid was inclusive of the tax. Then, the Government requested the brokers to act as agents for producers, collect sales tax and remit the same to the Government registering themselves as the assesses. This was to make the collection easy ridding the Government of the need to count on the turnover and tax leviable on each individual producer-seller.

Things were running relatively smooth until the Tamil Nadu Government introduced last year an AST at the rate of one per cent on the taxable turnover between Rs 10 and Rs 25 crore per year. Broking firms with separate legal entities in different auction centres escaped this additional burden as the collective turnover of their clients did not exceed Rs 10 crore. But, those companies with multi-centre operations under one name were issued notices to pay this additional AST.

Since then till now, these companies had been pleading for removing themselves from acting as agents for the producers. The tea trade associations conducting the auctions have appealed to the Government to exempt Coimbatore and Coonoor auction centres from the purview of this additional burden. The Government has told the brokers to pay AST and recover it from the producers.

"This is an impractical advice. No individual sellers' turnover exceed Rs 10 crore. So, the affected broker cannot recover AST from any of these sellers. How can the Government tax the brokers who act as agents for the producers and do not own teas? ", the immediate Past Chairman of the Tea Trade Association of Coimbatore (TTAC), said.

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