The average chicken-loving Malayali ended up paying 14.5% more in tax than his Tamil counterpart post-VAT

Fish country Kerala has a chicken problem High VAT is affecting rooster marketImage for representation
news Wednesday, November 25, 2015 - 18:56

For decades, Kerala has always depended on neighbouring Tamil Nadu for its share of poultry supply. Then VAT happened.

In 2014, Kerala consumed around 1,64,000 metric tonnes of chicken.  The average chicken-loving Malayali however ended up paying 14.5% more in tax than his Tamil counterpart post-VAT. Ironically, the very state-tax which was supposed to rake in the moolah for the government is indirectly causing heavy loss to the exchequer in the form of tax-evasion.

A local agent who procures his share of chicks through dubious routes from across the inter-state border elaborates, “Chicken bought from Tamil Nadu and Karnataka farms are smuggled in using trucks, bikes, omni-vans and jeeps. We obviously try and avoid travel through check-posts. Numerous by-lanes and unfrequented routes which link the states are naturally preferred. In cars, around 900 kgs of meat can be smuggled while it’s 300 kgs on bikes. Bikes have the advantage of going unchecked through check-posts even with an obvious load, owing to the sheer amount of traffic that crosses over to each side on each working day.”

There are also hoteliers who prefer to deal directly with the poultry black marketers in a bid to avoid payment to middlemen. “There are agents who bring us chicken in bulk. They charge Rs 20-to-30 less than the market price when we make bulk orders. Sometimes, we do get it even cheaper. We don't actually enquire how it is procured, since they have been supplying us the meat for the last so many years. Well about VAT…what about it?” says a hotelier based in Kochi.

One of the retailers involved had this to share said, “We do get both legally and illegally procured chicken…well, most of the shops do that. If it is smuggled in, the profit margin is higher for us, depending on the prevailing market rate. Still, we can easily manage upto Rs 20-to-30 in profit per kg. You see, it is really difficult to bring in poultry products by paying tax. Moreover, there are a lot of complicated procedures involved.”

However the local agent TNM spoke to insists that the retailers rake in much more than just 30 bucks, as they don’t reduce the market-rate which somehow always hovers higher than the fair price, whether the chicken is procured legally or through illegal means. “Those who get chicken from other states will have to pay Rs.50-to-60 less than the fair price. Since those smuggling in the poultry don’t pay the requisite taxes, they can afford to reduce the rates while selling it to retailers, agents and to their regular customers comprising star hotels, wholesale chicken marts and also for grand social functions and feasts.”

Experts however feel that streamlining of tax collection from commercial points instead of check posts -as done now- would be the ideal solution. “The current base value for chicken is Rs.90, while that for chicks is Rs.25. With inter-state poultry smuggling on the rise, the traders try and garner profits much higher than if they had to pay 14.5% VAT for the same. The end-user who is the customer however ends up paying more than the fair price fixed by the government. It is not humanly possible to keep a 24-hour vigil at all border check-posts, as there are innumerable by-roads and multiple entry points into the state. What can be done is that the Sales Tax Department  could  ensure that local retailers be made accountable by regularly checking purchase bills which would by default reflect the tax paid in let’s say a single quarter of the annual buying cycle,” said a government official on condition of anonymity.

Unless a long-term panacea is not put in place to address this heavy loss to the state exchequer, the ultimate losers are the self-help groups who promote poultry farming under the aegis of the Kerala Poultry Development Corporation.  Recent newspaper reports suggest that in Kollam alone, the state incurs a loss of around Rs.25 lakhs per day in terms of tax evasion. Seizure of vehicles illegally entering the state with smuggled poultry seems to be the exception rather than the norm.

Naturally, the monetary benefits through unfair means trickle down only up to the level of the local retailer, rather than the end-consumer who is the layman. “It is hence profitable only for those in the game; if caught, well that’s a different story altogether!” chuckles the hotelier.

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