*TDS on free trade samples: Nilgiri Bought Leaf Tea Manufacturers seek Board’s clarity  – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/economy/agri-business/tds-on-free-trade-samples-nilgiri-bought-leaf-tea-manufacturers-seek-boards-clarity/article65599197.ece

Move follows amendment to Sec 194(R) of I.T. Act from July 1

The Nilgiri Bought Leaf Tea Manufacturers Association has expressed its inability to provide tea samples at free of cost in the ensuing Coonoor auctions.

The association’s move comes in the wake of amendments to section 194 R of the Income Tax Act which stipulates all free trade samples (FTS) would come under the bracket of 10 per cent TDS from July 1. With these amendments, manufacturers are liable to pay TDS for all the free samples provided to buyers and brokers in the auctions.

K. Dhananjayan, president of the Association, said FTS are mandatory to sell teas in the auctions as per pan India rules and the trading cannot continue without trade samples. At the same time, FTS are a big burden on manufacturers and small tea growers, as it amounts to ₹3-4 crore annually. For every lot that comes for sale, 3 kg FTS have to be provided. Approximately, each factory has to shell out ₹3-4 lakh every year on FTS. The association’s contention is that trade samples could not be given at free of cost and can only be paid entities.

Tea Board’s initiative

All manufacturing associations and UPASI have made representations to Tea Board on the need to revisit FTS considering the financial burden on small tea growers, he said.

The Tea board had initiated the process to relook at the FTS rules a year ago. But nothing concrete has materialised so far, he said.

On June 30, a day before the Section 194 R came into effect, he said the Board has written to the Central Board of Direct Taxes, requesting to exempt the FTS of the tea industry from the 10 per cent TDS on the ground that FTS is not a monetary benefit accruing to buyers and brokers.

Tea Board, in the letter to CBDT, pointed out that the distribution of tea samples to buyers and brokers is an integral part of the tea trade, as these samples form the basis of the assessment of the quality and price of the teas. The methodology is in practice for long in the tea trade for fair realisation of the product.

As no benefit or prerequisite is being given to the brokers or buyers of teas through such distribution of samples, they should not be considered for deduction of tax. The Board also urged CBDT to provide clarification on the matter and allow relaxation to the tea industry

According to Dhananjayan, the demand of the association is that is that unless Tea Board gives the declaration that it will collect the 10 per cent TDS from the buyers and give it to the manufactures for all teas sold after July 1, the association will not be in a position to provide the samples at free of cost.

There are reports that the Tea Board suggested that TDS should be collected from the buyers and paid to the manufacturers for FTS supplied based on the final invoice generated.

Published on July 04, 2022

tea (commodity)

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