Feb 24, 2021
The All India Food Processors’ Association (AIFPA) represents several large, packaged foods companies such as Haldiram’s, PepsiCo, Marico, Britannia, ITC, Bikanervala, among others; has written to the GST Council to lower tax rates for what it calls commonly used food products such as packaged or branded pickles, chutneys, sauces, fruit drinks, along with branded snack such as namkeens, bhujias, fruit and vegetable chips made of potato and banana.
India presently has four GST rates of 5%, 12%, 18% and 28%, apart from a cess on luxury and demerit goods such as automobiles, tobacco, and aerated drinks.
Domestic food processors have again requested the finance ministry to lower GST (goods and services tax) rates on packaged snacks such as potato chips, namkeens, and pickles ahead of the GST Council meeting in March.
Currently, most of these products attract a GST of 12%. The association has requested the government to consider putting them in the 5% GST slab.
The letter comes amid reports that the Centre is considering merging goods and services tax rates of 12% and 18% into a single slab. The companies fear that the creation of a new tax bracket could increase their tax burden and invariably the cost to consumers.
AIFPA has written to the council that the branded or packaged snack foods namkeens, bhujias, fruit and vegetable chips made of potato, banana is currently placed in the 12% GST slab, so are ready-to-cook products like instant noodles. These are consumed by people from all segments of society.
In the meantime, unbranded snack foods are charged 5% GST and this creates an irregularity in the sale of processed foods in the country.
AIFPA said, “This anomaly has created huge complexities and encouraged the production of unsafe and unhealthy unpackaged food in the market. Contrarily, Covid-19 has shown us a roadmap to encourage the use of safe packaged food and not unpackaged food. In fact, a shift of consumption from branded to unbranded foods reduces revenue to the government and proves counter-productive.
Since the stressed economic viability of food processing industry, uncertainties of the crop, unstable farm product prices, and huge blockage of funds for making year-round supplies, the sector needs special hand-holding, the letter added.
India’s fast-moving consumer goods are built around high spending on food items. In terms of value, food contributes 57% to FMCG sales, according to market researcher Nielsen. These include staples such as pulses, rice, apart from snacks such as namkeens, cookies, chips, and beverages.
The association is also seeking the removal of taxes on cutting, brining, and syruping of fruits and vegetables apart from pulping and crushing of such raw materials. Currently, these steps are charged 5%, 12% GST which is counter-productive to the objective of saving the wastage of fruits and vegetables, the letter said.
Industry bodies, as well as companies, have made repeated calls to lower GST on packaged foods. For instance, biscuit makers have sought reduced tax to 5% on lower-priced biscuits or those priced below Rs100 per kg compared with the current 18%.