March 19, 2021
In spite of several presentations of letters and reminders made to the central government demanding a reduction in GST rates, till date the food processing industry has received no satisfactory replies. Taking a try once more, ahead of the GST Council meeting next month, the food industry representatives have requested the Union Finance Minister and the GST Council to reduce rates on packaged snacks, ready-to-cook, and ready-to-eat food products along with other food products.
In a letter to the finance ministry, the food industry has sought lower tax rates for what it calls “commonly used food products” such as packaged or branded pickles, chutneys, sauces, and fruit drinks, along with branded snacks such as namkeen, bhujia, and potato & banana chips.
At present, 12% of GST has applied on these products, food processors want them to be put in the 5% slab of GST.
The letter comes amid reports that the government is considering merging the GST rates of 12% and 18% into a single slab.
The food processing companies fear that the formulation of a new tax slab will increase their tax burden and invariably its cost to consumers.
India has four primary GST rates of 5%, 12%, 18% and 28%, apart from a cess on luxury and demerit goods such as automobiles, tobacco and aerated drinks.
The letter also stated that GST of 12 percent is levied on branded or packaged snack foods which include namkeens, bhujias, fruit and vegetable chips made of potato and banana etc but, these are eaten by all segments of society.
Meanwhile, unbranded snack foods are charged 5% GST, and this creates a difference in the sale of processed foods in the country, the letter informed.
“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 road map 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,” the letter reads.
Addressing media Sanjay Indani, founder, promoter & head, SafeFoodz Solutions, Navi Mumbai, said, “Most of the countries in the world have a lower tax on a lot of foods, while their inflation is within 2 percent. Thus India being a country with an inflation level of 6 percent could not afford to have higher GST for food items which constitutes a major portion of Consumer Price Index. The high GST rates on food products have an adverse impact on the growth of the sector.”