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FBMI doesn’t endorse differentiation in GST rates within biscuit sector
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Saturday, 25 March, 2017, 08 : 00 AM [IST]
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Our Bureau, New Delhi
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The Federation of Biscuit Manufacturers of India (FBMI), representing the Rs 27,000-crore organised biscuit industry, does not endorse differentation in goods and service tax (GST) rates within biscuits, as all varieties of biscuits - including cookies, cream biscuits, crackers and glucose biscuits - are available at the same price points.
Any distortion in the rates within competing products in this sector will create artificial layers. It will encourage spurious products, to the detriment of the consumers. Moreover, it will make GST complex to administer and difficult to comply with by the traders, kirana stores, etc. involved in the sale of these products.
There is a predominance of the small- and medium-sized enterprises (SMEs) at the retail level, and they will are ill-equipped to handle multiple rates within a sector or industry. GST provides the right opportunity to correct these anomalies, by providing a simple uniform lower GST rate on all biscuits, instead of price-based taxation.
Biscuits are an affordable and nutritious food item for all ages and socio-economic segments, consumed by 85 per cent of all households and across all income segments in India. Commensurate with the growth in the aspiring middle class, there has been an increase in the consumption of all types of biscuits.
More varieties are now available and being bought across all income segments. Given this, the tax system should not distort or interfere with the different products being introduced in the market, nor with the choices among them.
One nation, one market
FBMI is proud to be a part of the one nation, one market initiative, to be achieved through GST. The federation, affiliated to PHD Chamber of Commerce and Industry, has been supporting various initiatives of the government for more than 60 years. It has contributed to the nation’s goals of achieving food safety, food fortification and wastage reduction.
FBMI is fully supportive of the mammoth efforts of the government in transforming the current indirect tax regime through GST, through a participative and consensus-building process.
With 93 per cent of the food basket comprising basic food, which are proposed to be exempt or taxed at a lower GST rate, taxing the remaining seven per cent, that comprises processed food items, at a higher GST rate will not be in the interest of fairness and simplicity, the basic goals of GST.
Further, discrimination of food products, on the basis of their being branded or unbranded, premium or non-premium, will not only be against the principles of efficiency and equity, but will also lead to classification disputes and a complex record-keeping and compliance system.
Equitable GST regime
Hence, FBMI, in a representation to the government, has requested for a fair, simple, equitable and neutral GST regime. This will be in line with the other good policy initiatives being taken by the government, such as ease of doing business and a liberal foreign direct investment (FDI) policy, to attract new investors in the food processing sector in India and encourage existing businesses to expand.
The federation is of the view that the GST regime can reach its optimum efficiency in tax collection, by the expansion of the tax base within the biscuit industry at a lower merit rate and not by taxing a section of the consumers at higher rates at the cost of others.
A higher GST rate, even for a segment of biscuits, would impact their demand in the entire value chain. It would result in cutting down on the procurement of raw materials by biscuit manufacturers, that would adversely impact farmers across India. A lower demand will also negatively impact investments, exports and employment in the food industry.
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