With the GST rollout nearing, members of the Bombay Sugar Merchants Association (BSMA) have stopped buying sugar from mills from Tuesday to avoid losses on purchases made in the next few days until the month end. Traders are predicting short supply in the market which may result in chaos in the short term. This, despite a surfeit of stock with the mills. The association has asked finance minister Arun Jaitley for a credit of Rs 124 per quintal which they have paid as sugar cess that goes towards the sugar development fund. According to the association members, in the existing scheme of taxation, buyers pay Rs 71 per quintal as excise duty and Rs 124 per quintal as the sugar cess.
According to Ashok Ranawat, president, BSMA, traders have been informed that while trades will get an input tax credit of Rs 71 per quintal (paid as excise duty) on their opening stock as on July 1, 2017, they will not get an input credit of Rs 124 per quintal paid as sugar cess. Under GST, sugar has been included in the 5% tax bracket.
“It appears that on July 1, 2017, traders will lose Rs 124 per quintal and to avoid the losses, they will stop buying from sugar mills from today” Ranawat said in a memorandum submitted to Jaitley. According to Mukesh Kuvedia, secretary general, BSMA, there could be chaos in the market between June 30 till July 4 or July 5 as many of the traders are yet to get their GST numbers and are yet to get familiar with the new system. The association had earlier urged the government to reconsider or defer the decision to bring sugar, the only essential commodity proposed to be brought under the GST and had resorted to a one day bandh as well.
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The traders’ concerns relate to the complex tax structure, disparity in the tax rates on raw and packaged agriculture produces, multiple tax incidence under mandi tax and fears of rising financial liability in case of a default by the pre-seller. Most raw agro produces are exempt from GST, but the same commodity, when cleaned and labelled, attracts 5% or even 12% GST, they had said. The association had pointed out that bringing sugar under GST will increase tax related formalities for traders, a majority of whom have never gone through the procedures. They will take time to understand and practically implement the pre and post sales systems related to GST. “We are afraid, this may impact the free availability of sugar across states,” Kuvedia had said.
Normal sugar sales in the Agriculture Produce Market Committees in Maharashtra usually comes upto 600-700 tonne a day but the impending GST has brought sales to a standstill with sales dropping down by half. There is all the more panic among market participants on the issue of implication of GST on existing stocks which were earlier tax free, Kuvedia said.