GST fear keeps exporters away from tobacco auction

Tobacco auctions across the State were stopped temporarily so as to allow the traders and exporters to adjust their account books in accordance with GST.
The tobacco auctions, which are normally concluded by July 15 and in extreme cases by  July 30, might continue till August 15 and even further
The tobacco auctions, which are normally concluded by July 15 and in extreme cases by July 30, might continue till August 15 and even further
Updated on
3 min read

VIJAYAWADA: Fears of tobacco farmers have come true as no exporter had turned up for the auctions which were resumed on Monday after a gap of three days. The reason: the apprehensions of the exporters with regard to GST. A few days before the rollout of the GST, tobacco auctions across the State that were being held since March were stopped temporarily so as to allow the traders and exporters to adjust their account books in accordance with the new tax regime. 

Only 64 million kilograms out of the 104 million kgs of the tobacco produced in the State was auctioned till that time with the average price being `137 per kg.  With the break in the auction, farmers were a worried lot and expressed apprehension that exporters might not turn up after the break.  “We had received information that the exporters were not happy with the new tax regime and chose not to participate in the auction anymore. If they do not participate, there will be no competition and the manufacturers like ITC will determine the price, which would naturally be lower than what we were getting till date,” explained Gadde Krishna,  a tobacco farmer from Buttayagudem in West Godavari district. 

Three districts in Andhra Pradesh — West Godavari, Prakasam and Nellore — cultivate tobacco. As against the permitted production of 130 million kilograms of tobacco by the Tobacco Board, only 104 million kilograms were produced. Though the farmers will not directly bear any tax burden, they will indirectly face the pressure as the traders will try to reduce the offering price citing the taxes they have to pay. 

The delay in clearance of the stock will prove dearer to the farmer, hence they are apprehensive of the situation after the implementation of GST. “As we have feared, since July 3, when the auctions have commenced again, there were no buyers. What we heard is that they are yet to get clarification with regard to GST and impact it would have on them,” said G Lakshman Rao, another tobacco farmer.  Rao, who owns 20 barns, sold 500 quintals of the 600 quintals of tobacco produced at an average price of `152 per kg. Though manufacturers like ITC have shown up for the auction, tobacco farmers were reluctant to sell their product as there is no price variation due to lack of competition. “It is true, the exporters failed to turn for past three days and we hope the situation will change soon,” Ravi Kumar, auction manager of the Tobacco Board, said. 

According to him, the tobacco auctions, which are normally concluded by July 15 and in extreme cases by July 30, might continue till August 15 and even further. Tobacco farmers, who have passed through a ‘low’ with lack of remunerative price and buyers, were happy that the situation had turned out to be better this year. Compared to last year, they are getting `14 more per kg on an average this year. 

On the other hand, exporters were apprehensive over the losses they might have to sustain as there was no clarity over the GST reimbursement (Input Tax Credit). “We got clarity just a few days ago. We are not bothered about the five per cent tax we would be paying on the loose leaf but are worried about the 28 percent tax on unmanufactured tobacco,” an exporter said. On Wednesday, a meeting was held between tobacco farmers and the traders and it is learnt that traders and exporters have assured the farmers to attend the auctions from Thursday. 

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