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PHD Chamber suggests preferred policy option on food processing sector
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Tuesday, 25 November, 2014, 08 : 00 AM [IST]
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Our Bureau, New Delhi
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fiogf49gjkf0d The preferred policy option should be imposed on the food processing sector; the rate of goods and service tax (GST) should not exceed four per cent, and the farm sector should be kept outside the scope of GST. These were suggested by PHD Chamber of Commerce and Industry president Sharad Jaipuria.
“The likely implementation of GST at more than 20 per cent on food processing sector would not only impact the sector adversely, but also hit the economic and social sentiments of the country,” he added.
The food processing industry is still at a nascent stage of development in our country, as only 2.2 per cent of the food output is processed in India, as compared to 78 per cent in the Philippines, 65 per cent in the United States and 23 per cent in China.
“At this juncture, the high rate of GST would slow down the growth trajectory of the food processing sector in India. Further, as food comprises a major part of the Wholesale Price Index (WPI), which is nearly 14.3 per cent, an increase in tax on food items would adversely impact the WPI leading to higher inflation in the country,” Jaipuria said.
“We believe that since food constitutes a large portion of the consumer basket of lower-income households, any tax on food would be regressive in nature. Further, extending GST to the food processing sector would also cause difficulty in view of the fact that production and distribution of food is largely unorganised in India,” he added.
“On the global front, most of the countries tax food at a lower rate keeping in view the considerations of fairness and equity,” Japiuria stated.
“Even in countries such as Canada, the United Kingdom and Australia, where food constitutes a relatively small portion of the consumer basket, food is taxed at zero per cent. And in countries such as Singapore and Japan, food was taxed at a standard rate, which was as low as three per cent, at the inception of GST,” he added.
“Even in international jurisdictions, no distinction is drawn on the degree of processing of food. Hence, the benefit of lower or zero tax rates should also be extended to all food items in India, regardless of the degree of processing,” Jaipuria said.
“Going ahead, a lower GST on processed foods would benefit not only the growth of the food processing sector in the country, but also the society at large,” he added.
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