Until July 1, Chandru Nadar sold toor dal under the “Dove” trademark. Now, he prefers to sell it without a brand name, thanks to the Goods and Services Tax (GST) that levies 5% tax on branded produce.
While the pros and cons of the new tax regime are still being debated, traders of two major crops in north Karnataka — toor dal and Sona Masuri rice — are struggling to cope. The sale of the crops under registered trademarks attract 5% tax, making them costlier compared to unregistered brands, which are not taxed.
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In order to avoid GST, toor dal traders in Kalaburagi, and Sona Masuri rice traders in Raichur, Sindhanur, Gangavathi, Karatagi, and other towns and cities along the Tungabhadra paddy belt are now either giving up their trademarks or stopping sale under registered trademarks.
For instance, in Kalaburagi, one of the major red-gram growing districts in the country, there are over 250 dal mills of which only six had registered their unique brands under the Trade Marks Act. Now, all six have deregistered their brands to avoid GST.
“Even 5% tax makes a huge difference in the highly competitive market. Dal mills with unregistered trademarks can sell the product at much lower prices as their brands do not attract GST,” Mr. Nadar told The Hindu.
Pointing out that there are additional costs incurred in maintaining quality of product for selling them under registered trademark, Yogarajan Nadar, trader, said the actual difference would be more than 15%.
“When we carry out business under registered trademark, the product is subject to quality check by government officials. We spend about 10% additional cost on processing to maintain quality,” he said. Mr. Nadar looks after a 70-year-old toor dal business that was started by his grandfather, who hailed from Tamil Nadu and settled in Kalaburagi. He recently deregistered his Peacock brand to avoid GST.
There are over 400 rice mills in the towns and cities along the Tungabhadra Left Bank Canal that irrigates nearly 6 lakh acres of paddy fields in Raichur and Koppal districts. Most of the mills sell rice both under registered and unregistered brands. With 5% GST, these mills have stopped selling the product under registered trademarks.
“At present, I have stopped selling Sona Masuri rice under my registered brand ‘Parivar’. But, I continue selling the product tax-free under different unregistered brands,” said Maram Tippanna, a rice trader from Raichur. He, like many other rice traders, is hoping for relief at the GST Council meeting which is expected to be held in the first week of August.
Mr. Tippanna pointed out that there was a huge demand in Bengaluru and other metros for Sona Masuri rice grown in the Tungabhadra irrigation belt and marketed under registered trademarks, but the traders were not able to supply them under the same brands and for the same price after GST.