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Inconsistencies in Mandi tax adding to GST burden

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The traders and various other companies are going to face another stumper for goods and services tax due to the uneven mandi tax. There are so much discrepancy and enigma regarding the mandi tax that a particular company procuring grain in Punjab is required to pay 6% tax, whereas its counterparts are only supposed to pay 4% and 0.2% in Haryana and Madhya Pradesh respectively.

The experts believe that this is going to create a significant imbalance in the interstate flow of the crops, which would eventually hurt the farmers as the buyers would give them a low price to set off the high taxes. AIREA (All India Rice Exporters Association) has raised this issue with the Finance Minister, Mr. Arun Jaitley. The association has requested uniformity in the tax rates across the country.

Mr. Viay Setia, who is the president of AIREA was of the opinion that though all the states now came under the purview of GST, yet there was a huge difference when it came to taxes regarding mandi. This was against the theory of one nation one tax, he added. The effects of the huge variance will have an enormous negative impact on the income of the farmers, and also it would create an imbalance in the flow of crops and paddy as well across the states.

In Punjab, the tax rate is 6%, including the market fee of 3% and 0.25% as cancer cess and 3% rural development fund when it came to the production of basmati rice. Comparatively, it is ₹ 1.75kg cheaper to buy the rice from Madhya Pradesh than Punjab. Though the amount looks very small but considers when the purchase has to be in lakhs of tonnes. Also, the transportation cost is 70-80 paisa per kg, which is very low in MP.

Mandi tax varies a lot across the major commodities. For instance for pulses, mandi tax in Uttar Pradesh is 2.5%, while in MP it is 2.2% and only 0.6% in Gujarat. In Maharashtra and Andhra Pradesh, it is 1%. The industry prefers a uniform tax across all mandis pan India so that it is a level playing field for everyone.

e-NAM is expected to make the state taxes redundant with time.

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Anand Narayanaswamy works as a journalist based in Trivandrum, India. After unsuccessfully completing the company secretary course, Anand decided to step into software and technology route. More recently, he had a great interest in exploring about the Goods and Services Tax.

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