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Additional levy hits TN edible oil trade

M.R. Subramani

CHENNAI, Dec. 12

EDIBLE oil trade in Tamil Nadu has been affected following the State Governments decision to levy additional sales tax on the commodity based on the business turnover.

As per a notification issued on December 1, the State Government would charge one per cent of the trade turnover between Rs 10 crore and Rs 25 crore as additional sales tax. For a turnover between Rs 25 crore and Rs 50 crore, the levy is 1.5 per cent, fr om Rs 50-100 crore it would be two per cent, for Rs 100-300 crore the duty would be 2.5 per cent and for a turnover exceeding Rs 300 crore, the tax would be 3 per cent. Besides the additional levy, the State Government, in order to mop up revenue, has im posed a uniform floor sales tax rate of four per cent.

Ever since the Government issued the notification, the trade has been badly hit. Transactions have been at a very minimal level, an edible oil importer said.

The notification stipulates that the trade cannot pass the tax burden to customers. This has badly affected us, the importer said. This will only lead to importing firms open office in neighbouring Pondicherry or resort to consignment sales, where dubiou s methods can be followed to evade duty.

Another trader said the State Government should attempt to rope in big players but the additional levy would discourage such players. The margin for the traders is between 0.25 per cent and 1 per cent. Now, if we are to pay duty and not pass on the burde n to the consumers, then we will soon go out of business, he said.

There is no way to stop the burden from being passed on to the buyers. It will be passed on in some form or the other, the importer said.

Trade sources said significant players such as Cargill and Adani Wilmar could trade up to a turnover of Rs 290 crore and then stop imports into Chennai port.

For bigger players, the additional burden could be nearly Re 1 a kg. This could be too much in a price-conscious market, they said.

Sources in the import sector said the trade was trying to impress on the Government to do something on the additional sales tax. A lobby is trying to get the additional duty withdrawn, they said.

The Tamil Nadu Governments decision to impose these levies could have a long-term effect on edible oil trade as Chennai port topped in shipments of RBD palmolein into the country last season (November 2000-October 2001) with imports being 4.01 lakh tonne s against 4.91 lakh tonnes the previous year. Chennai also topped in import of sunflower oil at 1.09 lakh tonnes.

The trade fears that the tax burden could lead to the trade shifting to Kakinada and Mangalore ports for importing edible oil.