Purchase tax sours Karnataka cane mills’ mood

BANGALORE: Sugar mill owners in Karnataka have sought an urgent re-look at various fiscal laws governing their sector. Speaking to the media, M Srinivasan, president of the Karnataka chapter of the South India Sugar Mills Association, said the state government had to take a closer look at purchase tax and implement the Union government’s One Time Financial Assistance Package (OTFAP).

“We have to pay a purchase tax of Rs 65 per tonne for mills based in south Karnataka whereas our counterparts in the north pay Rs 75 per tonne. As sugar has not been included in the value-added tax (VAT), net the purchase tax can’t get us input credit. In a scenario where the cane prices are rising and the price of the output (sugar) is declining we are on a losing wicket,” he added.

Neighbouring Maharashtra levies a purchase tax of Rs 35 per tonne. As sugar is categorised as an essential commodity and is not included under the VAT system, the provisions of the Karnataka Sales Tax Act are applicable.

Karnataka with an annual production of 1.9m tonnes ranks fourth in terms of sugar production. Mr Srinivasan said the state had also not implemented the Union government’s OTFAP. The OTFAP was aimed at providing financial assistance to sugar mills at a concessional rate of about 6%.

According to Mr Srinivasan as many as seven sugar mills had put up capacity for ethanol production. These include Shree Renuka Sugars, Ugar Sugar, Godavari Sugar Mills, Prabhulingeshwara Sugar, Doodh Ganga, Vishwanath Sugar and Samson Distilleries.