Sugar trade awaits clarity on GST; cotton industry welcomes move

Wholesale traders had reduced sugar purchases in June due to uncertainty about cess and claim there is a shortage in the supply chain
Following the introduction of GST from July 1, the sugar trade is still awaiting clarity on the cess that mills pay, while the cotton industry has welcomed the new regime and the poultry sector is bracing for feed to become more expensive.

Sugar, cotton and poultry sectors are the top employment generators both at the front and back ends. Sugar traders are not sure about cess after implementation of GST.

"It is still not clear to us if we will get back the Rs 124/quintal cess we had paid on the sugar that was bought till June 30," said Ashok Ranavat, president of the Bombay Sugar Merchants' Association, which did not put out a rate for the commodity on July 1 and declared there was no stock. Wholesale traders had reduced sugar purchases in June because of un certainty about cess and claimed there is a shortage of the sweetener in the supply chain.

The GST on sugar is 5 per cent. In the previous tax regime, there was excise duty of Rs 71/quintal, which is about 2 per cent of the sugar price, and a cess of Rs 124/quintal. Cotton brokers are happy. They expect demand for cotton to increase because GST on the commodity is less than that on manmade fibre.

The GST on cotton is 5 per cent, the lowest slab. "2017-18 will be a good year for the cotton textile industry with a sound tax ecosys tem and real-time govern ance coupled with avail ability of surplus cotton," said Senthil Kumar, chairman of the Southern India Mills Association ( SIMA).

SIMA, however, is disap pointed that the 18 per cent GST on manmade fibre (MMF) and spun yarn hasn't been reduced and would result in an inverted duty structure problem as fabric would attract only 5 per cent GST. A reduction to 12 per cent from 18 per cent would have prevented the inverted duty problem. "The decision of considering any change in tax structure after three months would seriously affect the synthetic spinning and grey fabric manufacturing sectors," said Senthil Kumar.

He said the inverted duty would increase fabric prices steeply and make Indian textile uncompetitive. In poultry segment, the price of soyameal will increase by Rs 800t to 850t from the current price of Rs 24,000t to Rs 24,500t, an increase of about 3.3 per cent, said DN Pathank, executive director of Soyabean Processors Association of India.