Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns the iconic Amul brand of milk and dairy products, will have to pay Rs 2 as TDS for every Rs 100 worth of cash payments it will make to new dairy farmers joining its network on request of Gujarat and Maharashtra governments.
Amul has been asked to procure milk from these non-members by state governments of Gujarat and Maharashtra after their normal supply sources - local dairy firms and sweet shops - either shut down during the lockdown or failed to procure enough quantities.
While all of Amul's regular suppliers are paid via electronic, cashless transfers, the new farmers require payments in cash. Amul's cash withdrawal from banks to pay these farmers incurs a 2 per cent TDS. As a result, every Rs 100 worth of milk procured in cash is costing Amul Rs 102.
"Payment for non-members is by way of cash, and that is a problem. If you withdraw more than Rs 1 crore, there is a 2 per cent TDS that you need to pay. We are requesting the government to keep this limit in abeyance for the lockdown period because we do not have bank facilities everywhere, and our staff is limited," R S Sodhi, managing director of Amul says.
Thousands of new diary farmers, who have temporarily joined its supply ecosystem during the ongoing lockdown
Due to lockdown-linked restrictions, GCMMF is finding it difficult to get non-members on e-payment platforms and, thus, looking to reimburse them in cash.
None of these farmers, who require cash payments, are the members of milk cooperatives from whom GCMMF sources milk on a normal business day.
Amul is procuring 35 lakh litres of milk from farmers every day during the lockdown period.
The direct payouts to farmers due to the additional milk procurement itself could amount to Rs 600 crore for the last 40 days, Sodhi says.
In Union Budget 2019-20, the government announced levying 2 per cent TDS on cash withdrawals above Rs 1 crore. This was done in a bid to discourage cash transactions and move towards cash-less economy.
The change came into force in September 2019.