Rationalization of GST and reforming the farm sector; expectation from interim budget this year

Jan 24, 2019

The food-processing industry’s top expectations from the government during this budget session are rationalization of GST, creation of infrastructure at the farm gate and higher budgetary allocation for the food ministry. Processing of food, primarily fruits and vegetables, is crucial for doubling farmers’ income, as the government has promised, say industry executives.

Last year budgetary allocation for the Ministry of Food Processing Industries was nearly doubled to Rs. 1,400 crore and this has boosted the expectations of the sector. Also the present government has set the tone for the food-processing sector through various measures. The roadmap for the next term or the next government will be to rationalize tax rate that is as high as 28% on some some of the food products. Food industry is very much important then, the film industry and if cinema ticket can be made cheaper, tax slabs can also be brought down for food products, making them more affordable.

The government realises that growth of the food-processing sector and job creation in allied sectors is an answer to the rural distress and ensure that farmers don’t have to seek for loan wavers. So it is important that the next government to abolish GST on the sector.

It is extremely unfortunate that while farmers are compelled to discard fruits and vegetables in the glut season, if someone converts those produces into pulp, it attracts 12% GST. The world has found a solution to save wastage of natural produce by strengthening primary processing to catch the glut produce and convert it into a stable form.

Food processors said for the next five years, the government must encourage indigenous development of low-cost food-processing equipment, particularly for the micro, small & medium scale enterprises that comprise 90% of the food processing application in the country.

Besides reforming the farm sector, the government should allocate more funds for the rural sector to build a better road network. Also, higher job creation in rural India will foster demand for food products.

Cluster development should be the focus for the government instead of only focusing on large-scale food parks ad focus should shift to the development of pack houses, point of sale and logistics infrastructure.

The CII recommends accelerated depreciation to equipment and machinery used in all segments of the food-processing industry, tax deduction at 200% under Section 35 for promoting the ‘Made in India’ brand abroad, benefits under section 35 AD for cold-chain projects that commenced operation prior to April 2012, and extension of benefits given to infrastructure projects to food parks as well.



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