How single-origin coffees in India disappeared


Under the Constitution, agricultural income can be taxed by the State and not by the Centre. However, in the case of tea, the Centre contended that there was a substantial manufacturing process involved in the production of tea; hence, income from tea could not be classified as fully agricultural income and that a part of the income had to be taxed as central income.

Income Tax Act:

  • Under Sec 8 of the I-T Act, which stated that due to the manufacturing activity involved, 40% of the income would be taxed by the Centre.
  • In 2002, the Centre then followed the same logic and introduced Sec 7 & 7B for rubber and coffee respectively. It decided to partially tax the agricultural income from both commodities, claiming there was manufacturing activity involved.
  • Where coffee is cured or hulled before being sold, manufacturing activity was involved and hence 25% of the income was to be taxed by the Centre.
  • Curing is a process by which raw coffee is converted to green beans ready for roasting. Substantial machinery and effort is involved but the actual cost of curing works out to about ₹2 per kg for a product worth about ₹200 per kg, or 1%. The Centre thus claimed the right to tax 25% of the agricultural income from coffee.


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