Bitter reaction to VAT on Sugar in Tamil Nadu

CHENNAI: Tamil Nadu has imposed value-added tax of 5% on sugar, joining neighbouring Andhra Pradesh and likely resulting in higher prices for consumers.

"All sugar industries are suffering losses. This tax will be passed on to the buyer," said a top executive with EID Parry, a sugar manufacturer and part of the Rs 24,000-crore Murugappa Group. Sugar factories pay Rs 99.18 as excise duty for every quintal.

Including the VAT that came to effect on Saturday, the total selling price of the sugar will reach Rs 3,300 a quintal.

About three years ago, state revenue by way of additional excise duty on sugar, besides the basic excise duty that goes to the central government, was scrapped.

"The state got no revenue from sugar. This could be a move to bring them into the VAT net," said an executive of a top sugar manufacturer who wished to remain anonymous.

"Our buyers such as Pepsi and Coca-Cola will go to Karnataka and Maharashtra," said an industry representative, referring to the tax disparity on sugar.

The industry has already sent a memorandum seeking to revoke the tax imposition.

The state has set an ambitious target of raising Rs 68,000 crore in tax in the fiscal year 2014-15. VAT makes up two-thirds of the commercial tax pie in Tamil Nadu.