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FRUITS & VEGETABLE

With price reduction, veg, fruit segment to benefit post-GST imposition
Monday, 10 July, 2017, 08 : 00 AM [IST]
Prashant Nikale, Mumbai
The fruit and vegetable segment is likely to get a fillip following the imposition of goods and service tax (GST), which has nullified all the other taxes. With the reduction in their prices, the dehydrated fruits and vegetable industry will look to expand their businesses and exports.

Following the GST Council’s decision to place fruits and vegetables in the zero per cent GST slab, Nilesh Lele, secretary, Association of Food Scientists and Technologists [AFST(I)], said, “The dehydrated segment will grow tremendously. Earlier, the combined amount of value-added tax (VAT) and excise was approximately 18 per cent, but GST on flakes or powder will amount to only five per cent.”

“The GST levied on value-added products (for instance, soups made from dehydrated vegetables) will remain the same. It was approximately 18 per cent previously, and will continue to be the same,” he added, stating, “Confusion is prevalent in the market because people don’t realise that GST is trying to consolidate various taxes into a single tax and not trying to increase or decrease taxes on a cumulative basis.”

“The common person believes, or has been made to believe, that the prices will go up. The challenge lies for small businesses that were below the Rs 1.5-crore excise limit and did not pay excise earlier. Now, in the GST regime, their prices will rise and make them less competitive. These manufacturers will have to become efficient in their operations to stay in business,” Lele added.

Rashmi A Kolhe, director, D'Armonia Consulting, said, “Dehydration of vegetables has been promoted as a cottage industry under different food processing schemes. Farmers and farmer-producer organisations (FPOs) look at it as a simple solution to prevent the losses of their vegetable crops during the glut season or when the market prices are low. So, in a way, the exemption of dehydrated vegetables from GST is a big relief for such small players.”

“It is further going to promote the dehydration of vegetables and strengthen the industry. This will directly help in reducing the post-harvest losses, which are close to 30-35 per cent as of today,” she added, saying, “Dried vegetables, whole, cut, sliced, broken or in powder form, but not further prepared or converted into any finished product, are exempted from GST.”

“This includes mushrooms and other edible fungi, as well as the mixtures of dried vegetables including flakes/powder of potato, garlic, asparagus, etc. On fresh fruits and vegetables, anyway there is no change in the tax structure under GST. Earlier also these commodities were exempted from any taxation. So there is going to be no change in the prices of fresh produce,” Kolhe added.

She said, “Under the previous taxation system (VAT), dehydrated or processed vegetables and mushrooms was a common category. In Maharashtra, upto six per cent VAT was applicable to dehydrated or processed vegetables. Now, one can expect a small price dip in this commodity, as it has been removed from tax slabs.”

“Under GST, vegetables and their products are further divided into sub-categories with separate HNS codes. Co-relating your product with the right HNS code is what many people are still struggling with. The GST rates and Hazardous and Noxious Substances by Sea (HNS) Convention codes for vegetables are covered in Chapter 7. Under that, there are 14 sub-chapters containing the vegetables’ details and their products with respective HNS codes,” Kolhe added.

“On all vegetables to be sold in the fresh and/or chilled forms, GST rates are nil. Frozen vegetables, with or without blanching, have been placed in the five per cent GST, while those that have been preserved by merely using preservatives or brine for industrial use will also attract five per cent GST,” she said.

Savji Thanth, managing partner, Maahir Foods, Mahua, Gujarat, shared a contrasting viewpoint. He opined that GST was going to affect the segment in both ways.

Thanth said, “For now, the domestic sale of dehydrated vegetable products, on which five per cent VAT or two per cent Central sales tax (CST) was levied earlier, has been placed in the zero per cent GST slab, but for exports, it is really a difficult situation, as the ocean freights are now subject to 18 per cent GST. In the past it was zero per cent.”

He added, “Now the freight cost will increase by 18 per cent if we export based on cost, insurance and freight (CIF) or cost and freight (CNF). In the long run, this will result in losses and affect the competitiveness of the deliveries.”

Shital Patel, director, Anmol Dehydrates Pvt Ltd, Ahmedabad, said, “The manufacturing lobby for dehydrated products is happy with the decision, but we are still confused about certain products, as their GST rates are still not clear.”

Though there are still mixed reactions coming from different sectors, the dehydrated vegetable and fruit segment is pleased with the decision. GST is definitely a challenging move by the government. It will take time to get the clear picture.
 
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