FBD: Indian Biscuit companies lobbying for 4% GST     

Leading Indian biscuit companies like Priya Gold, Anmol, Crown, Biskfarm and others have approached to the government in order to reduce the proposed Goods and Services Tax (GST) on biscuits to 4 per cent from 12 per cent.

The 13th Finance Commission task force on the proposed Goods and Services Tax (GST) has recently recommended a single 12 per cent rate on all items and suggested deferring implementation of the new tax regime by six months from April to October next year.

The government has planned to introduce the GST that will replace excise duty and service tax at the Central level and Value Added Tax (VAT) at the state level besides the surcharges and local taxes being levied on good and services, from April 1, 2010. The task force has said the GST be introduced from October 1, 2010.

Leading Indian biscuit companies through their apex organization Indian Biscuits Manufacturers’ Association (IBMA), which represents per cent of Indian biscuit companies, have submitted their representations to the Government of India requesting 4 per cent GST on biscuit from proposed 12 per cent.

“IBMA has submitted representation for reduction of GST on biscuit from 12 per cent to 4 per cent, especially on account of acute hardships and losses being experienced by biscuit manufacturers in the Small and Medium Enterprises (SME) sector,” Mr. K P Mohandas, Executive Secretary, IBMA, told FoodBizDaily.com here today.

IBMA said that biscuit manufacturers are suffering erosion in their wafer – thin margin mainly due to the continuance of 12.5 per cent VAT, while other similar products like bread, jam and juices are either exempted or levied 4 per cent VAT. Some of such products like potato chips, jams and jellies which do not have any nutritional value have a lower rate of VAT at 4 per cent. Even high end product like dry fruits has a VAT of 4 per cent in many states whereas biscuit which is a necessity has a VAT of 12.5 per cent.

“The overall adverse impact have already resulted in many small scale biscuit Units closing shutters and the levy of GST at the rate of 12 per cent will further lead unemployment of millions of workforce across the country,” Mr. Mohandas said.

“Four per cent GST can stimulate 20 per cent annual growth in biscuit production our association (IBMA) estimates that the biscuit industry’s annual growth will shoot up to more than 20 per cent CAGR (compounded annual growth rate), in the event of reduction in the rate of GST on biscuits from the proposed 12.5 per cent to 4 per cent as against annual growing of 10 per cent to 14 per cent in the previous 5 years,” Mr. Mohandas added.

According to Mr. Mohandas, India’s biscuits industry is the largest among all the food industries in India and has a turnover of around US$ 1800 million. The annual production of biscuits in the country is 1.75 million tones during 2007-08, which witnessed minimal growth of 8 per cent in 2007-08 and only 5 per cent in the first quarter of 2008-09. The per capita consumption of biscuit is a meager 1.8 kg in India.

Source: FoodBizDaily.com (press release), India, dated 14/01/2010