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ICMA's wishlist for the budget - Vat at 4%, reduction in other taxes
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Saturday, 20 June, 2009, 08 : 00 AM [IST]
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Our Special Correspondent, New Delhi
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Indian confectionery industry, in its budget proposal, has demanded zero per cent excise duty on all items of confectionery including sugar confectionery containing cocoa and chocolate products, and chewing gums and bubble gums.
The Indian Confectionery Manufacturers Association (ICMA) suggested that the central government should prevail upon the states to lower the VAT rate on confectionery items at 4%.
Confectionery industry, largest among the food processing industries with an annual turnover of around Rs 3,500 crore and with a huge potential to grow as per a study report by Mckenzie, has so far not received any relief in excise duty and continue to remain at the high rate of 16% on all items except sugar confectionery products levied at 8% (candy/toffee), according to M N Rao, secretary, ICMA.
"The abatement in the rate of excise duty related to MRP also continue to remain at 35% on cocoa and chocolate products and 40% on sugar confectionery, though the state levies and marketing expenses have increased since then," Rao told Food & Beverage News.
Rao said that the state government also levied VAT at the high rate of 12.5%. In addition, octroi is also levied in some states at 5%. The industry is finding it extremely difficult to absorb such high rate of duties levied by both the central and state governments.
According to Rao, the confectionery industry uses different agro and dairy based produce such as milk, milk products, cocoa, sugar, glucose, fruit extracts and vanaspati which are major ingredients in the production of sugar confectionery, gum based products and chocolate products adding value in the processed food chain.
The industry also plays an important role in the economy of the country specially the small scale industries which depend largely on this industry supplying intermediary inputs like printed wrapping materials, PET jars, corrugated boxes with an annual requirement of about Rs1,000 crore. Besides, the transport sector is also immensely benefited in the transportation of confectionery items through the nook and corner of the country. In addition, the confectionery products are retailed over 10 lakh outlets spread throughout the country. The industry thus provides ample opportunities to the self-employed, service sectors like transportation, packaging etc.
ICMA sources argued that processed food items containing milk, nuts, chicory, biscuits, ice cream, snack foods, ready-to-eat packaged foods bhujias and pasta foods are all completely exempted from excise duty while confectionery including cocoa-based products containing milk, a perishable item, and nutritionally rich confectionery is levied excise duty at high rate of 16%.
A study undertaken by McKenzie projected the potential in the confectionery industry in India at over Rs 5,000 crore per annum whereas the current turnover is around Rs 3,000 crore.
"There is also the issue of duplicates and look-alikes. In order to maintain the quality products, the association created a cell which is looking into the issue of such spurious goods.
The quality inspection of confectionery products at the port has to be strengthened to ensure that the goods imported into the country meet fully the specification to the product and labelling requirements as per the Prevention of Food Adulteration (PFA) Act.
The total confectionery market in India has reached almost Rs 3,500 crore. There are four categories of confectionery in the organised sector - chocolate confectionery, sugar confectionery, gum and cereal bars. Sugar confectionery is the largest product category. Sugar-boiled confectionery, consisting of hard-boiled candy, toffees and other sugar-based candies, is the largest of the segments. Industry is expecting that it will remain the most lucrative category over the next five years. These products are most suited to the Indian climate. Chocolate and gum confectionery follow this, each with a similar sized share of the Indian market. Standard grocers are the leading distribution channel, with one-third of the Indian confectionery market, by value. Traditional grocers are the only other channel to take a double-digit share. The remainder of the market shows a high degree of fragmentation.
Nutrine Confectionery and Parry Confectionery dominate the organised segment, apart from the Indian arms of MNCs such as Perfetti India and Warner Lambert. There are other players in Indian market such as Lotte, Wrigley's and Cadbury's.
The confectionery industry in the country is now facing hurdles with taxation and raw materials problems that affected the growth also.
"The real potential of confectionery industry was never utilised fully due to the wrong policies of the government", Rao added.
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