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MP raises VAT on bidi to 13%, makers sulk
March, 09th 2012

The Madhya Pradesh government has raised the value-added tax (VAT) on bidi to 13 per cent from five, brushing aside demands from the industry to lower it. The states bidi manufacturers, though, will enjoy an input tax rebate facility on the VAT paid on tendu leaves (the leaf used to wrap the ethnic cigarette), according to state officials.

The move, overall, has disappointed the bidi manufacturers. The Madhya Pradesh Bidi Industry Association has, for a while, been demanding a slash on the VAT on their product. The state has the highest VAT rate on bidi vis--vis bidi-manufacturing states such as Rajasthan, Haryana and Bihar besides Delhi all of them pegging it at four per cent. The VAT on tendu leaves in Madhya Pradesh is 25.3 per cent.

This raise in VAT on bidi will further escalate its prices, according to Mina Pimplapure, president of the association. It will also boost illegal business of bidi, and encourage smuggling of the product from neighbouring states.
On its part, the government says the rise in the VAT on bidi will create a competitive environment for the industry in the state. We have offered an input tax rebate on the bidi industry, points out A P Shrivastava, principal secretary (commercial tax department). It will offer a facility to adjust the tax that the industry pays on tendu patta, he told Business Standard.

Explaining, the official says that though the manufacturers will have to pay 13 per cent tax on bidi, they will get a set-off in the tax they pay on tendu leaves. The excess tax will thus be adjusted, he adds. This will not only protect the domestic industry; it will also ensure higher returns to the manufactures and employees.

The bidi industry, which is mainly centered in tribal-dominated areas like Jabalpur, Sagar, Raisen and most of the Bundelkhand region in Madhya Pradesh, has a combined turnover of roughly Rs 300 crore. It generates employment for thousands of people, even as it poses a risk of blindness to the makers that largely involves children.

Further, bidi manufactures do not maintain any record or data for turnover or volume. It is very difficult to maintain data, maintains Piplapure. We do not know the number of bidi manufacturers or labourers in the industry. Our association does not keep any data on the matter.

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