Unification of the tax rates in Kerala and Tamil Nadu and the implementation of KVAT at a rate of 2% will facilitate a boom in the cardamom business in Kerala, said Dr A Jayathilak, chairman of the Spices Board. "This will facilitate the entry of more local dealers from Kerala to the small cardamom trade," he said in his letter to the agriculture production commissioner of Kerala.

"The cumulative effect will be more recovery in prices to the growers due to increased demand arising out of more bidders in the e-auction. The Spices Board is committed to issuing more small cardamom dealer licenses to increase bidding participation in the e-auction," he said.

According to him, the small cardamom industry is featured by the presence of interstate traders. "Despite the efforts from the Board to issue more small cardamom dealer licenses, around 80% of the dealers who participate in the e-auction are from Bodinaykanur, Thevaram and Cumbum in Tamil Nadu.The root cause for this scenario is the difference in the tax structure between the two states.

The purchase of small cardamom by a dealer registered in Kerala is treated as local purchase and KVAT at a rate of 5% is applicable, whereas the purchase by a dealer registered in any other state is treated as an interstate purchase and CST at the rate of 2% only is applicable," Jayathilak explained.

An interstate buyer is getting a tax benefit of around Rs 20 per kilogram of cardamom purchased in e-auction, he noted. "Considering an average purchase size of 1.5 tonnes per dealer, the interstate buyer enjoys a huge price advantage of Rs 15,000 for every auctionThis gives the interstate dealer a distinct competitive advantage in the small cardamom trade," Jayathilak added.