India GST Rules Worry Exporters Concerned About Revealing Blending Recipes

Tea harvest on tea plantation; Photo credit: ThinkStockPhotos.com

Compliance with India’s new Goods and Services Tax (GST) reveals trade secrets that will hinder the competitive stance of tea blenders and exporters.

Dipak Shah, chairman of the South India Tea Exporters’ Association (SITEA) told reporters that “asking for details of blends from exporters is like asking for Coca-Cola’s formula.”

The tax requires exporters to identify each supplier listed on shipping bills, which is tantamount to revealing the unique composition of blends, according to Shah.

“Since teas from 30 to 40 different tax invoices may be used to make a single blend for export, how can such details be incorporated in the shipping bill?” he asked in a note addressed to the GST commissioner in Chennai.

Lots purchased at auction may consist of tea from various growers that are mingled at the factory. Exporters are not able to provide a copy of the procurement orders for teas purchased through an electronic auction, said Shah. “Should our bids be treated as a prior order? There is no clarity in this, there is a lot of confusion,” he said.

“The GST regime is extremely complicated, it needs to be simplified and made user-friendly,” said Bharat Arya, the chairman of the Federation of All India Tea Traders Association in Calcutta.

Consistency is critical for consumer acceptance and blending multiple teas is essential to maintain the uniform quality and taste. Blending allows tea manufacturers to overcome season-to-season variations in teas from different gardens. India is the world’s second-largest tea producer with an annual production of more than 1.2 million metric tons of which more than 230 million kilos are exported. More than 70 percent of this tea is purchased at auctions managed by the Tea Board of India.

Tea production spikes in Assam and falls in South India

Tea worker; photo courtesy of the Namsang Estate, Assam, India

Tea output climbed 17.3 percent in October, compared to the previous year, with Assam growers reporting they harvested 100 million kilos of tea, up 13.8 percent.

In the southern regions, tea production declined 20 percent in the short term but remains ahead of the previous year. Declines were attributed to “terrible weather” during late summer through September. In Darjeeling, production was halted during a 104-day strike.

India has produced a total 1.09 billion kilos compared to 1.07 billion kilos during the previous year, up 1.44 percent. It is possible, with a strong November and December harvest, that India will surpass last year’s harvest of 1.2 billion kilos reaching an estimated 1.28 billion kilos.

Exports overall increased 6.5 percent during the first 10 months of the year, rising to 189.7 million kilos according to the Tea Board of India. Shipments are valued at $578 million through October, which is a 4.8 percent gain over 2016. Major export destinations remain the same as past years with Egypt, Pakistan, and the U.K. buying mostly cut, tear, curl (CTC) and Iraq, Iran, and Russia (CIS) ordering whole leaf.

On a per-unit basis, prices were down to INRs196.35 per kg from INRs199.62 per kg because of a stronger rupee against the dollar and a slide in the sterling against international currencies. In dollar terms, Indian tea fetched $3.01 per kg compared with $2.98 per kg in the year-ago period, according to the Tea Board.

Azam Monem, chairman of the Indian Tea Association told The Telegraph, “After a decline in 2016, exports have shown healthy growth. Prices, in dollars, are also better because of currency fluctuation. However, the net realization for the industry is higher because of the volume pick-up. As an industry, we should focus on the subcontinent and the Asian markets where consumption is growing. India needs to export at least 50 million kg more tea.”

Source: The (Calcutta) Telegraph