The Indian Coffee Trade Association (ICTA), the only authenticated platform conducting coffee auctions in the country, may collapse soon if the government fails to take immediate measures on the taxation front.
One of its three auctioneers, Carritt Moran, has cancelled its membership with ICTA reportedly due to an alarming fall in coffee volumes traded on the ICTA in recent years, sources said. An ICTA official, requesting anonymity, said volumes had declined to around 10,000 tonne per annum (tpa) from 23,000 tpa in 1993-98. ICTA currently auctions a meagre 3-5% of the country?s total coffee harvest.
ICTA was established in 1993 after the coffee market was liberalised as an autonomous body to conduct auctions at the premises of the Coffee Board. Producers in Karnataka, Kerala and Tamil Nadu–accounting for 95% of the country?s production?joined ICTA, which witnessed robust growth in the first five years.
Moreover, while the London and New York exchanges provide benchmark prices for only three or four varieties of coffee, ICTA emerged the only agency to facilitate the price discovery for more than 25 varieties in India.
But ICTA members started feeling the heat when the government imposed section 7B of the income-tax rules, stipulating that 25% of income from the sale of cured coffee would be computed as derived from business and, therefore, taxed. As planters could sell only cured, clean coffee through
ICTA, they started selling raw coffee at the farmgate to avoid tax liability.
The Coffee Board has recommended that growers be exempt from section 7B. However, sources said, ?The government has enhanced the taxable income by only a little, but that has not helped growers as they still liable to file returns.? In addition, growers hesitate to bring their produce to the ICTA as settlements take 10-15 days.
Indian Coffee Exporters? Association president Ramesh Raja said, ?The Union government should take immediate measures or other auctioneers may also cancel their membership and ICTA may down its shutters in the near future.? ICTA membership has declined to around 250 from 450. However, two other auctioneers, J Thomas and Forbes, said they would continue conducting auctions.
