Gutka traders have disapproved of the UP government's decision to increase VAT on tobacco products from 12.5 per cent to 50 per cent, with some considering shifting their business to Delhi or Uttarakhand.

The state cabinet on Friday increased tax upto 50 per cent from existing 12.5 per cent.

Earlier in Uttar Pradesh, the tax summed upto 18.5 per cent along with additional tax and entry tax but now it tallies up to almost 55 per cent.

"Gutka manufacturers who used to earlier pay around 18 per cent tax will now pay 55 per cent. We will now have to increase 25-30 paise per gutka pouch that other small shopkeepers will increase to 50 paise. As a result, the gutka that a customer used to get for one rupee would cost him Re 1.50 now," Rakesh Agrawal, gutka manufacturer and president of the pan masala traders and general stores said.
Agrawal said there are around 200 pan masala manufacturers in Uttar Pradesh out of which 10-12 big and 35-40 small manufacturers are in Kanpur itself.

According to Agrawal, gutka manufacturers and traders are "unable to pay such high VAT".

"We are planning to migrate our business to some other state. Delhi and Uttarakhand are two major options because both are close to Uttar Pradesh and VAT in both the states are much lower.

He also said that shifting of gutka business will create unemployment in the state.

"If gutka business shifts to another state, not only will the UP government suffer lakhs of but hundreds of workers and other staff involved in the business will be rendered jobless. Even raw material traders will be affected and Kanpur will suffer a setback as an industrial city because gutka pan masala is a huge business here," he said.