New Delhi: Amid furious protests against the controversial land laws passed by the Center, a much more widespread and profound controversy has arisen over the taxes levied on state agricultural markets.
Members of the ruling Bharatiya Janata Party have been criticizing the Agricultural Products Market Committee tax in an effort to counter the protests and backing the recently enacted laws with the claim that they will remove that tax.
Claiming that only Punjab farmers are involved in the protests, senior BJP leader and Rajya Sabha MP Sushil Modi recently said: “The mandi tax in Punjab is 8%, which is a good income for the state government and intermediaries, but the farmer suffers. The new agricultural laws of the Center make a dent in this system, so the intermediaries and some state governments are instigating the farmers (to continue with their movement) to tarnish the image of the Prime Minister ”.
While Sushil Modi believes that the state government and intermediaries are benefiting from the mandi tax, official documents obtained by The wire disclose that the Union Ministry of Finance had justified the imposition of such a tax on mandi and that the Union Ministry of Agriculture had also supported it. The ministry had said that this amount is collected for the services offered in the mandis.
In its recommendations, the National Farmers Commission, also known as the Swaminathan Commission, created in 2004 to address the agrarian crisis, called on states to urgently improve the APMC system.
In this regard, the Commission had also said: ‘The collection of market tariffs as a regular tax on agricultural products as in the model Law / Rules APMC can be reviewed and, if necessary, States can be encouraged to switch to a service charge based on the use of services by farmers instead of the mandatory levy. This will go a long way towards ensuring a single national market. ‘
Giving preference to this recommendation, the then government included it in the 201 recommendations of the ‘National Agricultural Policy’ in 2007, which the Ministry of Agriculture had planned to implement. However, the documents show that the Ministry of Finance had said that the recovery of said amounts in the mandis is justified because in exchange facilities are offered to people there.
The Ministry of Finance, in its letter to the Ministry of Agriculture and Agricultural Welfare, said: “The market fee is not a tax and the APMC in question provides facilities in mandi in exchange for the amount.”
The department also said the government is considering a tax reform in the form of GST, under which a provision will be made to impose uniform tariffs on agricultural products across the country. Since the introduction of GST, these charges have also been reduced.
Interestingly, the Ministry of Agriculture and Agricultural Welfare had supported this provision and, in this regard, APMC model rules were issued for states in November 2007.
These regulations provide for the imposition of market duties on agricultural products. On this basis, 16 states amended their APMC Act, while four states made partial amendments. Seven states do not have an APMC Law.
The Swaminathan Commission, in its third report presented on December 29, 2005, said: “The government needs to abolish the market price of agricultural products and the charges applied to many services such as loading, unloading, weighing, etc. there will be a single service charge to use all the facilities on the market. “
The Commission argued that due to the different charges, the same product is taxed twice many times. This creates a disruption in trade not only between two states but also from one market to another within the state itself.
Mandi tax in all states
A major misconception that is spreading against the mandi tax is that until now farmers had to pay taxes to sell their products in the mandis, but the new law will give them a break.
However, this is not true. In mandis, only traders (government and private) have to pay market fees or mandi charges, rural development fees and commissions to intermediaries (known as arhatiya commission).
According to the Food Corporation of India, an agency of the Indian government, the market tax is charged at 8.5% in Punjab and 6.5% in Haryana. Of this, Punjab charges a market fee of 3%, a rural development fee of 3%, and a commission of 2.5%.
In Haryana, the figure is 2% market fees, 2% rural development fees, and 2.5% commission.
Similarly, during the wheat purchase this year, a 3.6% market tax was imposed in Rajasthan. Further, arhatiya A social commission of Rs 27 per quintal of wheat purchased was also paid.
There was a 2.5% market tax for the purchase of wheat in Uttar Pradesh and 2.2% in Madhya Pradesh.
Similarly, the market tax collected during the purchase of rice in Punjab and Haryana was 8.5% and 6.5%, respectively.
Photo: Agricultural Prices and Costs Commission
Meanwhile, during the purchase of rice in the previous year (2019-20), a market tax of 2.5% was imposed in Uttar Pradesh, 2.2% in Madhya Pradesh, 2.2% in Chhattisgarh, 1.05% in Maharashtra and 1% in Andhra Pradesh. Along with this, a social commission of around Rs 32 per quintal of rice will also be paid to the trade board in these states.
The Mandi tax was the lowest in Kerala at 0.07%. In Karnataka, agricultural products attract a 3.5% commission.
Photo: Agricultural Prices and Costs Commission
In protest against three controversial agricultural bills passed by the central government: the 2020 bill on trade in agricultural products and agricultural products (promotion and facilitation), the farmers agreement (empowerment and protection) on price guarantee and the Agricultural Services Act 2020 and Essential Commodities (Amendment) Bill 2020 – Farmers have been holding demonstrations on the borders of Delhi for the past month.
Farmers fear that with these laws the government is destroying the established system of providing MSP and once it is implemented, farmers will be at the mercy of traders.
The Modi government, on the other hand, has repeatedly denied these allegations and has instead been describing the new laws as “historic agricultural reforms.” He has been claiming that they have been creating an alternative system for the sale of agricultural products.
In accordance with recently enacted laws, no tax will be paid on trade outside of APMC mandis. However, farmers claim that private markets will impose their own taxes despite exemptions granted by the government, which is likely to benefit the trader and private companies.
Following the farmers’ agitation, the Ministry of Agriculture has offered to allow states to levy taxes on private markets outside the APMC.
Translated from the Hindi original by Naushin Rehman.
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