Tea firms to approach Centre to seek exemption from TDS on cash withdrawals

Tea plantation companies, led by the Indian Tea Association (ITA), an apex body of various tea firms, approached the Centre on Saturday seeking exemption from the mandatory norm of paying two per cent TDS on cash withdrawals exceeding Rs 1 crore annually. This new norm was passed in the Union Budget yesterday.

The plantation companies, although keen on digital payments, are of the view that given the infrastructural and banking set-up in the country, it will not be possible for them to digitise payments and the TDS will further stress the firms which are already reeling under financial pressure.

According to Arijit Raha, secretary general at the ITA, the TDS will put an additional burden on the industry as a whole by compromising the liquidity position of tea companies. 

Around 60 per cent of the total cost of production comprises of wages (both in cash and in kind) which is paid in cash. On an average, an individual tea company spends around Rs 12 crore annually on wages alone. Besides, other components like regular maintenance work is also paid for in cash.

"We have written to the union finance secretary to exempt the tea industry from this provision till such time the bank accounts of tea garden workers are made operational," Raha said.

According to Arun Thekedath, director at Baruanagar Tea Estates, most of the workers’ bank accounts which were opened during the demonetization days are not operational due to infrastructural issues like access to banks, lack of ATMs and availability of cellular and data network. 

“Most of the gardens which had moved over to digital payments have rolled back to cash”, he said.

Around 60 per cent of the 850 odd tea gardens in Assam are located in remote areas where both access to banks as well as availability of cellular and data network is a challenge. Thus, companies like Segunbari Tea Company, Baruanagar Tea Estate, Aideobari Tea Estate and even bigger firms like Goodricke Group have been relying on cash payments to its workforce.

Wages to around 1.5 million plantation labourers in Assam and another 0.8 million workers in West Bengal are given on a weekly or a fortnightly basis.

“The two per cent TDS will directly pull up our cost as we won’t be able to pass it over to the buyers. Tea prices are already tepid”, Sujit Patra, secretary at the ITA said.

According to Thekedath, the Consultative Committee of Plantation Associations – a confederation of various plantation associations - will also approach the Centre next week to seek a similar exemption.

“I am optimist that the Centre already knows about the situation in the tea sector and the infrastructural access it has. I think we will receive a favourable response from the Centre once we approach them”, A . Singh, non-executive vice president at the Goodricke Group said.

Gardens in Assam where ATMs have been installed so far, or ones that have easy access to them, have been pegged at around 4-5 per cent only and a single bank branch in Assam services around 20 estates on the average. This translates into servicing 16,000-20,000 tea workers alone on a weekly basis. In cases where estates do not have access to ATMs, both the managerial staff, as well as the workforce, have to travel 5-20 km to reach a branch for banking services.

There are further concerns. Almost 50 per cent of the workforce is illiterate, threatening to derail the Centre's plan to go cashless.

Moreover, in the wake of Centre planning to streamline multiple labour laws into four codes, the ITA will also appeal to the Centre to consider the kind component of wages like housing, education, electricity and others, to be considered while formulating the codes and narrow down on minimum wages.

Besides, the association has also asked for more comprehensive coverage of social welfare schemes in the gardens.

  • Assam has 850 tea estates
  • 60% of these are located in remote areas unserviceable by banks
  • Only 4-5% of tea estates have access to ATMs
  • A single bank branch in Assam services around 20 estates on an average
  • Assam has 1.5 million tea estate workers

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