Confusion over GST takes a toll on Tamil Nadu tea auctions

Tea auctions in Coimbatore and Coonoor have been impacted following the implementation of GST on July 1, due to a great deal of confusion about the new tax regime.

Industry representatives claim that a miniscule percentage of the total printed quantity has sold due to lack of clarity in billing.

Recent data shows that only 63,895 kg, or 17 per cent, of the overall printed quantity of dust tea of 377,406 kg at the Coimbatore auction on July 7 found buyers. About 198,391 kg of leaf tea was available for auction, but just about 36,722 kg, or roughly 18 per cent, came under the hammer.

At the Coonoor auction, of the total arrivals of 536,932 kg of dust tea, only 31,356 kg, or 5.84 per cent, was sold, while 51,072 kg of leaf, or 4.26 per cent out of a total quantity if 1,199,020 kg found buyers.

Only one auction has taken place since July 1, according to industry representatives.

Hemen Shah, chairman, South India Tea Exporters Association, said the Tea Board has directed sales of teas through the auction in four major centres -- Kolkata, Guwathi, Siliguri and Kochi --- through registered broker contracts. But for sale of teas at auction centres in Coimbatore and Coonoor, in Tamil Nadu they have directed sales under seller's contracts.

This will lead of accounting difficulties under GST regime, as it has caused a lot of apprehension among buyers who are confused because they have been made to follow two different system.

Some of the sellers are offering tea both at the Tamil Nadu and the Kerala auction centres. Each centre entails a different billing module, which will lead to mismatch of GST returns for both buyers and sellers.

The Association has asked for a uniform system to be followed across all auction centres, in line with the Tea Board's aim to have a pan-India auction system.

Issues of mismatch under the previous VAT regime have not yet been resolved and buyers are still having issues with the department over a lot of settled claims, Shah noted.

He said there is a great deal of apprehension among buyers that the present system is flawed because the seller/ producer raises the contract on the buyer and the buyer in turn makes the payment to the broker through the settlement bank.

This has led to a whole lot of queries from the authorities on the sanctity of such transactions where the contract is raised by A and payment is made by B.  

The Association has asked Tea Board to immediately allow the auction system to run smoothly by following a common billing system for the entire country.

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