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Budget - Food processing sector seeks credit at low rates, tax holiday
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Tuesday, 07 January, 2020, 08 : 00 AM [IST]
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Ashwani Maindola, New Delhi
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The All India Food Processors’ Association (AIFPA) has sought policy interventions such as credit at low rate and tax holiday from the government to increase the productivity of food processing sector. In a pre-Budgetary memorandum for the financial year 2020-21 sent to the Union Finance Minister, the association has highlighted these demands.
AIFPA wrote to the minister that since large part of the food processing industries is under MSME, therefore the industry may be given credit facilities for capital expenditure at low interest rates of 3% to 5% as is given for ‘crop loans.’ And if adopted for new units as well as for expansion of existing units, particularly in ‘dairy’ and ‘fruit & vegetable’ sectors, it would have positive outcome.
The association further sought ‘a five-year tax holiday’ for processing units irrespective of their location.
“This will ensure that entrepreneurs can set up units at their locations and do not have to trans-locate themselves to distant places which incur high overheads, logistics expenses and wastes precious time & energy,” opined AIFPA.
The association recommended that the provisions of Sections 45(4), 46, 47 of the Income Tax Act may be amended to enable redistribution of the assets of the firm to its partners on or dissolution without levy of ‘Capital Gain’ as in the case for companies.
Meanwhile, the Budgetary recommendations by the AIFPA also suggest ways for ‘Increasing Exports’ Of Food Products.
AIFPA added in its recommendations that the ‘Merchandise Export from India Scheme (MEIS)’ has been withheld to be replaced by a new scheme i.e., Remission of Duties or Taxes on Export Product (RoDTEP). It recommended that the new scheme be introduced urgently as exports are losing viability. It was also requested that the new scheme should provide the benefits of the MEIS Scheme @ 20% and not reduce the incentive on exports.
AIFPA also sought Export Inspection Council facilities be enhanced and charges reduced to make exports viable.
AIFPA, in its memorandum, raised issues of WTO hurdles jeopardising the Indian food export particularly restriction on ‘Indian Milk Products/Products Having Milk Content’ by many countries and imposition of high Duties (20%) on Indian Fruit Pulps/Pastes by EU are ‘Non-Technical-Barriers’ in the form of technical or certification deficiencies.
According to AIFPA, some FTA & PTA Agreements are also disadvantageous to India and there was a need to tackle such issues urgently and create a level playing field through equivalent reciprocity.
Meanwhile, the AIFPA, in its presentation for Budgetary proposal for the fiscal 2020-21, has also sought immediate intervention from the government on key issue of GST rates vis-à-vis food processing sector.
The association wrote that in the GST Tax Structure a number of food products including snack foods have been levied higher tax if the same are packed and branded. This is not a good approach. Firstly, it mobilises sale in loose form which is unsafe and unhealthy. Secondly, it reduces consumption of packaged food. Thirdly, government loses revenue. Logically, packed food should be encouraged and not placed at higher GST rate.
The AIFPA recommended that pulps/purees of fruits & vegetables should be placed at 0% GST along with whole/cut fruits including raw mangoes put in salt/brine/preserving solutions.
In its proposal, the AIFPA also suggested ways for increasing consumption of agri-produce.
It wrote, ‘Common use foods such as pickles, chutneys, murabbas, sauces, juices, squashes, sharbats, whole/cut fruits packed in sugar syrup, instant food mixes, ready-to-eat foods, namkeens, bhujias, biscuits, fruit & vegetable chips, flavoured milk, ghee, butter, dehydrated & frozen fruits & vegetables, snack foods should be placed at a maximum of 5% GST,’ while adding that these foods are not elitist.
Further, AIFPA added that ‘traditional & ethnic foods’ deserve to be placed at a maximum of 5% GST.
According to a senior functionary of the AIFPA, “While a farmer discards tomato under distress, if an entrepreneur takes initiative to make pulp from it to convert it into a stable form, the Finance Ministry levies 12% GST. Similarly, raw mango is in glut in the growing season and if someone stores it in salt to save it from perishing, 5% GST is charged. We are aware that product cost has to be reduced to increase consumption but packaging materials are charged 18% GST.”
He concluded, “The contradictions are too obvious to be ignored. Each department works for its allotted function but its adverse impact on the sustenance of the industry is not taken seriously. The industry remains under severe pressure and lacks growth.”
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