BudgetSpeaks #7: R S Sodhi: No toll for milk tankers on highways, please…

01 Jul,2014

By R S Sodhi


A] Income Tax:

1. Reduction in Income tax on Cooperative Sector :


Cooperative Societies are working for the benefit of farmers and it has brought prosperity especially in the villages. At present, there is no basic exemption to cooperatives under Income Tax Act. Further, the highest tax rate of 30%+10% Surcharge is also applicable on Cooperatives for income exceeding Rs. 20,000/-.  There is a need to give basic exemption of Rs. 5 lacs to cooperatives and reduce the highest rate of tax to 20%.


2. Exemption to Cooperatives from the applicability of Domestic Transfer Pricing :


In Budget for 2012-13, the Domestic Transfer Pricing was made applicable to Cooperatives also. The object of Transfer Pricing is preventing evasion of tax by entering into transactions with associate persons. The meaning of cooperatives is nothing but achieving the common goal of welfare of members by associating various persons. Thus, there is no need to apply Transfer Pricing to cooperatives as the motive is social welfare. The introduction of Transfer Pricing on cooperatives will lead to complications in its implementation without generating any revenue for the Government and only administrative cost will be increased on the part of Income Tax Deptt. In certain scenario, the same cannot be implemented in cooperatives as bench-marking prices for transactions are not available in similar scenario.  The same is possible in Corporate Structure.


3. Exemption to Dairy cooperatives under section-32 AC of Income tax Act,1961:


The benefit of additional depreciation is given to companies only for investment of Rs. 100 cr. or more in Plant & Machinery under section – 32 AC of Income tax Act, 1961 w.e.f. 1-4-2014.  In fact, many expansion projects for more than Rs. 100 cr. are going on in cooperatives. This needs to be extended to dairy cooperatives also.


B] Excise and Service Tax


1. Remove excise from Molasses:

At present, molasses used in the production of cattle feed and Excise is levied on the same @ Rs. 1000/- per ton.  This is one of the factors which contribute to increase in the cost of milk production.  The Excise on molasses used in the production of cattle feed needs to be removed to bring down the cost of milk production.


2. Exemption of dairy industry instrument from service tax:

At present, the Service Tax is applicable on the use of cold chain facility for storage of dairy products and on hiring of cold storage.  This needs to be exempted for expansion of cold chain facility, resulting in smooth movement of dairy products from one part of the country to another part of the country.  It will also help to reduce the cost of cold chain facility in dairy sector.


3. Export duty increase for cattle feed raw material:

There is a need to impose export duty on export of oil-meals, de-oiled cake, cattle feed, etc. It will help to reduce the input cost of the milk producers as the price of these items will reduce due to increase in supply in domestic market.  Export duty of 10% on De-oiled Rice Bran (DORB) was withdrawn in the last budget.


4. Need to remove Excise duty from dairy industry equipments:

There is a need to reduce the Excise duty on dairy equipments which will result in clean milk production and hygienic milk handling by adopting milking machines.


There is a need to consider the Dairy Sector at par with Agriculture Sector and lending by banks should be considered as priority sector lending which will result in availability of funds at low interest rate to cooperatives.


There is a need to include loan for purchase of cattle under Crop Loan Scheme to farmers under interest subvention scheme where the finance at effective rate ranges between 5% to 6%. At present the average of cost of cattle ranges from Rs. 25,000/- to Rs. 1 lac. The farmers are taking loan at commercial rates from banks.  This will ensure availability of cheap finance to farmers for purchase of animals resulting in lower cost of production of milk and growth of Dairy Sector.


There is a need to exempt milk tanker from the levy of toll charge which is being paid on the express and national highways. In fact, the movement of milk in tanker is done to ensure stable supply of milk in milk deficit areas.


5. Need to adopt Model Cooperative Act.:

Currently adopted Co-operative Act was implemented during 1912. GoI has already prepared model Co-operative Act for Co-operative organization with several amendment. State Government need to adopt the same for better functioning of Co-operative organization.


R S Sodhi is Managing Director, Gujarat Cooperative Milk Marketing Federation  Ltd (GCMMF)/(AMUL)


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