18% GST on air freight leaves bad taste in the mouths of Indian betel leaf exporters

► Date : Jan 25, 2023


The imposition of an 18 percent Goods and Services Tax (GST) on air freight has hampered a revival in betel leaf exports from India. Exporters are concerned that this will give India's main competitor Bangladesh an advantage in export markets, particularly the United Kingdom, which has become the top buyer of Indian betel leaves due to its large Asian population.


Previously, Pakistan was a major consumer of Indian betel leaves imported from Kerala and other places. However, shipments dwindled after the Kargil war and eventually ceased as relations between the two countries deteriorated and Pakistan imposed higher duties on Indian betel leaf.


In India, the market for betel leaf, which is used in paan and as a mouth freshener, is concentrated in Kolkata, from which it is flown to several countries. It is transported by road to Bangladesh, a major buyer. Other popular destinations include the United Kingdom, Europe, Saudi Arabia, and Oman.


Betel leaf exports increased after the Shellac and Forest Products Export Promotion Council (Shefexil) took over registration of exporters for shipments to the United Kingdom (UK) and the European Union (EU) in September 2021. Instead of the Agricultural and Processed Food Products Export Development Authority, the council became the competent authority to issue the health certificate (Apeda).


India exported $6.18 million worth of betel leaves in FY22, compared to $3.56 million in the previous year. The industry reckons that the export would have more than doubled this year if the GST on air freight had not been enforced. Interestingly, there is no GST on betel leaves.


According to Dr Debjani Roy, Executive Director of Shefexil, 630 consignments amounting to 378 tonnes of betel leaves were shipped from February to November 2022 to the UK and France without any rejections for salmonella.


Indian betel leaf consignments had faced rejections due to the presence of the bacteria salmonella from the UK and Europe in the last few years. “After it came under Shefexil, we have competently addressed the issue of salmonella by educating the farmers and streamlining the production and testing procedures for issuing the health certificate,” Roy said.


The price realisation for export is more now as it is sent directly. When they did not get health certificates from Apeda, the exporters used to send the consignments to Sri Lanka, Thailand or Malaysia and re-export it to the UK or Europe changing the origin. Since this involved additional expense, it affected the export margins.


Bangladesh, which also exports betel leaf to the UK and Europe, could be the chief gainer because of the 18 percent GST charged on air freight by the government of India from October 2022. “We purchase the leaves at about Rs 210 per kg from farmers. And after adding all the expenses, we sell at Rs 300 per kg. GST is on top of this. Bangladesh doesn’t have GST and their production has increased, allowing the country to export at cheap rates,” said prominent exporter Premjit Adak, adding that it has led to a decline in Indian shipments in the last two months.


The traders and the exporters have taken up the issue with the government. “The government says they will refund the GST money. In that case, why should they impose it in the first place. As a result, the exporters are facing cash flow problems,” said Ankush Saha, Director of JGB Agrofresh Pvt Ltd.


West Bengal is now the leading producer of betel leaf in India. It is also grown widely in southern and northeastern states. E Arun, Partner of Suraj Trading, based in Kerala, buys betel leaf from the Kolkata market and exports it to Israel. “Since it is cultivated round the year in West Bengal, availability is not a problem. We do two shipments of around 200 kg a week. It is consumed by the Indians and other Asians in Israel,” he said.


In places like Kerala, the cultivation is seasonal with arrivals limited to the January-April period. Betel leaves from Tirur in Malappuram district of Kerala used to be much favoured in Pakistan fetching high prices. “Around 10 tonnes used to go from Tirur a week during the heydays of export. It was a lucrative business and leaves used to fetch Rs 1,300 to Rs 1,400 per kg,” Arun said. Pakistan’s betel leaf market has been captured by Sri Lanka. Betel leaf from Tirur now goes to states like Uttar Pradesh, Gujarat, and Rajasthan for making paan.


► Tags : #tax #betelleaves #gst

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