The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has urged the government to allow free import of Tobacco seeds for R&D and commercial purposes for recognized research and development institutions in private sector. In addition, it has also sought removal of service tax on properties and storage facilities that store tobacco leaf.

The Chamber has argued that free tobacco seeds import will ensure development of high yielding tobacco varieties as also hybrid in tobacco crops and therefore restrictions on imports of tobacco seeds be removed.

In its proposals submitted to the government, ASSOCHAM President,  Sajjan Jindal stressed that the new high yielding varieties and hybrid in tobacco will be offered to farmers with comprehensive field performance data so that their tobacco crops sowing patterns witness drastic improvements.

The introduction of high yielding variety of tobacco crops, according to ASSOCHAM, will lead to better farm economics through higher productivity.  In the long run, this will enable India to grow flavorful and other internationally benchmarked styles of tobacco that will fetch the higher realization in the world tobacco market and enhance farmers prosperity immensely.

The ASSOCHAM President expressed hope that government will consider the proposal in this regard as industry has for long been demanding lifting of ban on free import of tobacco seeds.

In addition, the ASSOCHAM  has also demanded removal of service tax on properties and storage facilities that store tobacco leaf.  Tobacco, argued the ASSOCHAM is a seasonal agriculture crop and therefore it is required to be stored so that it can be used year around.  Every tobacco trader, dealer, processor and exporter has to store tobacco in course of their business.

Therefore, imposition of service tax on renting of immovable properties for the use in business or commerce will increase the cost of storage and thus made the Indian tobacco exporter uncompetitive in the export market.

The ASSOCHAM has also said that levy of service tax on tobacco boards services is also uncalled for and demanded its removal saying that the Ministry of Finance vide office memorandum F.No.137/87/2008-Cx4 dated 14.8.08 has clarified that service tax will be applicable on services rendered by tobacco board.

This, according to ASSOCHAM will lead to further burden of incidents on high taxation on tobacco crop and make it uncompetitive in export market.  Therefore, service tax on services rendered by Tobacco board should be abolished.

The Chamber has also pointed out that Section 33A of Income Tax Act which permits development allowance for tea plantation should also be extended to tobacco crop development with a weighted deduction of 150%.  By this, those engaged in tobacco crop development, extension services and research will be encouraged to invest in upgradation of tobacco cultivation for improving returns to farmers and enhancing export competitiveness.

Similarly, assistance given to farmers by tobacco industry towards modernization of cultivation practices i.e. solar barns, seeding, irrigation equipment should be treated as business expenditure and given weighted reduction in the year, it is incurred.

India is one of the largest grower of tobacco in the world. It is estimated that over 30 million livelihoods are dependent on tobacco farming.  Most of the tobacco is grown in rainfed areas and in harsh agricultural conditions which do not lend itself to growing of other remunerative crops comparable to tobacco.  Given the huge livelihood support that tobacco farming provides, it is important to offer support to farmers and organizations engaged in building capacities of farmers, R&D, customised extension services and export development.

Source: ASSOCHAM

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