​ Industry wants exemption of tea from GST ambit

KOLKATA: Tea industry wants exemption of tea from GST as it is a garden produce and coming within the purview of the definition of agriculture. The industry officials feel that in case full exemption of GST is not possible then the rate should be kept on par with the current tax rate of 5% -6%.

Tea cultivation, harvesting and manufacturing is primarily an agricultural activity. Tea has been defined as an agricultural produce within the definition of the Service Tax Rules. Further in the Draft Model GST Law “Agriculture” includes floriculture, horticulture, sericulture, the raising of crops, grass or garden produce and also grazing. Therefore tea being a garden produce should come within the definition of Agriculture.

A senior tea industry official said " It would be pertinent to note that tea is a labour intensive industry. The primary cost for a tea estate would be cost of labour aggregating around 60% of total cost. Hence, the benefit of input credit as envisaged in GST scenario is considerably low."

The official added that while tea is an item of mass consumption, it is also highly price sensitive and a high tax incidence under GST could fuel inflationary pressures adversely impacting consumer demand. This would negatively impact the industry and result in price inflation.

Currently there is no tax on inter-state stock transfer of goods between two locations of the same entity or from principal to a consignment agent. Each inter-state movement may result in levy of 1% Additional Tax, which would actually cascade to 3-4%. Since tea is a common man’s beverage, it will create a cost burden to the end consumer affecting the ultimate sale price to the consumer.


The tea industry has also urged that the present concessional tax rate of 0.5 / 1% for teas sold through auctions be allowed to continue under the GST regime." Proposal to levy 1% additional tax on inter-state stock transfer should be abolished," the tea industry officials added.