Industry alleges surge in tax evasion on vegetable oil import

As per the estimates, in last six months Rs.150 crore of value added tax was evaded by giving wrong declaration in imports only on JNPT port

Trade circles have alleged a surge in tax evasion by importers of vegetable oils.

According to an official from the Solvent Extractors’ Association (SEA), importers bring in refined vegetable oil at Navi Mumbai’s Jawaharlal Nehru Port in the name of companies registered outside Maharashtra but the shipment is sold in the state, for cash and without payment of value added tax (VAT). Another industry official said even the parties in whose name the imports take place have often been found to be false.

Complaints to the VAT department had not resulted in visible action, further stoking inflow, said an importer. The current oil year began in November 2013 and about 200,000 tonnes are understood to have come at JNPT and been sold this way. The estimate of VAT evasion here in the past six months is Rs 150 crore, according to trade circles.

India’s annual import of vegetable oil has been $10-11 billion and several new entities have entered the business. The further allegation is that such tax-avoided imports are used for illegal blending with oil of a higher quality and sold. SEA says the imported oil business is run on high volumes and very thin margins, as competition is immense. Thus, such tax-evaded oil is sold cheaper, hurting genuine companies.

SEA circles say many entities from the real estate sector have opened subsidiaries for dealing in imported oil. For imports, the trade gets cheaper dollar finance for 90-180 days.

These entities use the cheap credit till maturity for their other businesses; the interest rates in realty are much higher.