Sending a final ultimatum to the state government, the Federation of All Odisha Traders' Associations (FAOTA) has decided to stop importing of pulses, wheat and wheat products for an indefinite period from April 9 of this year, if five percent VAT collected on these food items is not withdrawn.

The traders had gone on a two-day strike in December last year, stopping import of pulses, wheat and wheat items products demanding the waiver of the levy. But after a written assurance from the office of the Commissioner, commercial taxes, to look into their demands, the traders had withdrawn the strike.

"The government did not respond to our requests for discussion on the assurance given for exemption of VAT on the scheduled items. Meanwhile, three months given to fulfil the demands has also lapsed. So, finding no other alternative, the Federation of All Odisha Traders Association (FAOTA) in a meeting today, has decided to stop import of pulses, wheat and wheat products from other states from April 9 indefinitely until the government waives off collection of VAT on these scheduled items. If the issue is lingers further, the consequences will be serious," Sudhakar Panda, general secretary, FAOTA told media persons.

About twenty three states of the country have exempted VAT on pulses, wheat and wheat products. The association has reiterated its plea to impose one per cent entry tax on those food items instead of VAT, a move which it claimed would fetch the government Rs 50 crore to compensate for the VAT loss.

"The state government can introduce one per cent entry tax or it can bring these items under one per cent VAT slab that will ensure better tax compliance compensating the revenue loss," Panda added.

Traders said, the state government collects about Rs 30 crore VAT from pulses against the target of Rs 225 crore as unscrupulous traders are importing the item through back channels from neighbouring states where these items enjoy VAT exemption and not reporting the import or sale of the food products to evade tax.

Consumption of pulses in the state stands at about 0.9 million tonne per year with a business turnover of about Rs 4,500 crore. Odisha produces less than 10 per cent of its total demand.

Similarly, the monthly demand of wheat and wheat products in Odisha is estimated at 1.2 million tonne while the output is pegged at 0.35 million tonne.

The stocks will dry up in three-four days after imports are stopped, traders said.

Madhusudan Padhi, secretary, the food, supplies & consumer welfare department, was not available for comments.