Proposed 18% GST on purchase of unmanufactured tobacco riles farmers

Traders, manufacturers likely to bring down the purchase price of tobacco if they have to pay GST

The proposed levy of 18% Goods and Services Tax (GST) on purchase of unmanufactured tobacco has become a source of concern to the tobacco farmers in Karnataka.

Hitherto, traders and manufacturers were exempted from paying any tax while purchasing tobacco from auction platforms. The introduction of 18% GST on unmanufactured tobacco will indirectly hit farmers, said Javare Gowda, president, Virginia Flue Cured (VFC) Tobacco Growers’ Federation of Karnataka, told The Hindu.

“Much of the tobacco grown in Mysuru and adjoining regions is exported. Traders purchasing tobacco for international markets will compare prices and tax with other regions in the world before coming to the market. If they get the commodity elsewhere on the globe for a lesser price, they will skip our markets,” Mr. Gowda said.

Even though farmers need not pay the tax, sources in the Tobacco Board said tobacco growers are worried about the impact of introduction of GST on their interests.

Tobacco farmers in neighbouring Andhra Pradesh, where auctions are under way, are already up in arms against the introduction of GST. “Farmers fear that the traders and manufacturers will bring down the purchase price when they have to pay GST, which will hit the farmers,” he said.

Tobacco farmers in Karnataka, who defied the drought and reaped a rich harvest last year, had completed the plantation early this year and were looking forward to a good yield.

Despite an increase in output last year, tobacco fetched the farmers a good price of ₹134.58 per kg against the ₹135.24 the previous year. “Thanks to the early rains this year, tobacco plantation in the region was completed before May-end unlike in previous years when the process would continue till July. Even the distribution of fertilizers was completed before May this year,” a board official added.

In view of the good season last year, the Tobacco Board too increased the crop size from 95 million kg to 99 million kg for this year. Hence, the area under tobacco cultivation has gone up marginally from 76,000 hectares last year to 81,000 hectares this year at the rate of 1.3 hectares per barn.

Even though the board has stopped issuing fresh licences for tobacco cultivation with a view to bring down its production in line with India’s commitment to the Framework Convention on Tobacco Control (FCTC), the number of licenced tobacco growers in the State has been hovering around 42,000 and the number of unlicenced growers around 30,000.

The farmers have resisted any move to abandon tobacco cultivation as there is no other alternative crop that is as remunerative as tobacco.