The Spices Board has suggested to the State Government that reduction of VAT on cardamom from 5 to 2 per cent will make the commodity more competitive in the market.
In a letter to the Kerala Agriculture Production Commissioner, the Spices Board Chairman, A. Jayathilak, pointed out that VAT on cardamom in neighbouring States such as Tamil Nadu is 2 per cent, while in Kerala it is five.
Purchase of small cardamom by a dealer registered in Kerala is treated as local purchase and 5 per cent VAT is levied. In neighbouring States, it is treated as inter-State purchase and charged only 2 per cent CST.
A unification of rates will facilitate entry of more dealers from Kerala into cardamom trade and encourage forward integration, Jayathilak said.
The marginal revenue loss in terms of reduced taxes will be more than compensated by the increased volume of trade, he said.
The cumulative effect will be more recovery in prices to the growers due to increased demand arising out of more bidders in e-auction. Spices Board, he said, is committed to issuing more small cardamom dealer licences to increase bidding participation in e-auction.
He pointed out that the small cardamom industry is dominated by inter-State buyers. Despite concerted efforts by Spices Board to issue more dealer licenses, around 80 percent of the dealers who participate in the e-auction are from Bodinaykanur, Thevaram and Cumbum in Tamil Nadu, he said.
It is also observed that as inter-State purchases come under CST, they enjoy the advantage of transferring the goods to any part of the country as stock transfer to own godown at zero per cent additional tax whereas the local dealers have to pay an additional 2 per cent tax for inter-State transaction. This again gives the inter-State dealer a clear edge over dealers from Kerala, Jayathilak added.