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6-fold rise in taxes on beedis under GST
Beedis that quench the poor man\'s smoking quest are expected to turn costlier post July 1, with taxes under GST set for a six-fold jump, leading to fears among the industry players that sales will take a hit, forcing them to cut jobs.
Hyderabad: Beedis that quench the poor man's smoking quest are expected to turn costlier post July 1, with taxes under GST set for a six-fold jump, leading to fears among the industry players that sales will take a hit, forcing them to cut jobs.
In its 15th meeting last week, the all-powerful GST Council chaired by Finance Minister Arun Jaitley zeroed in on 18 per cent tax on tend leaves that are used for making beedis and chose 28 per cent, the highest tax among four slabs, for the finish beedis.
On tobacco used in beedies, there will be a tax of five per cent. Currently, there is five per cent tax on tendu leaves and piecebased central excise duty on beedis at the rate of Rs 16 per 1,000 beedis.
Though most states levy valued added tax (VAT) with Rajasthan leading the list with 65 per cent VAT on beedis, Telangana has exempted beedis from VAT as the beedi industry employs the largest number of industrial work force in the State, accounting for nearly 40 per cent of people employed in industrial sector.
“We are yet to read the fine print and assess the multiple layers of taxation the beedi making process and the raw materials used for it, attract.
But the overall impact will be severe as beedis will be levied 28 per cent under the new indirect tax regime that comes into force from July 1,” Hitendra Upadhyaya, President, Telangana Beedi Manufacturers Association (TBMA), told The Hans India.
According to him, under the Goods and Services Tax (GST) regime, the 28 per cent tax on beedis works to be well over Rs 100 per 1,000 beedies as compared with Rs 16 per 1,000 units now. That means a more than six-fold rise in taxes on beedis in the new indirect tax regime.
Besides, tax on tendu leaves will go up from five per cent to 18 per cent, imposing additional burden on the trouble-hit industry. “The additional tax burden because of GST will leave adverse impact on beedi sales as well as the market.
A large number of people from rural areas work in the industry and their livelihood will be at risk if sales fall and market contracts,” Upadhaya pointed out. As per the Annual Survey of Industries 2016 brought out by the Directorate of Economics & Statistics (DE&S), Telangana, the beedi manufacturing sector in the State accounts for over 40 per cent of the total industrial workforce which is estimated at 13.75 lakh (6.29 lakh workers and 7.45 lakh employees).
The beedi manufacturing units employ 2.98 lakh workers and 2.96 lakh employees, taking the total 5.94 lakh. According to the survey, the size of the tobacco manufacturing industry in the State is a pegged at Rs 1,210 crore.
Telangana is home to 700 beedi manufacturing units majority of which are in small scale sector with an employment strength of below 50. “About 45 major beedi companies are our association members and they cumulatively employ around 5 lakh people,” said Upadhaya.
