Union finance minister Arun Jaitley, in his Union Budget presentation, announced a slew of measures for the cold chain industry that would boost the backend infrastructure that is required to bridge the gap between farm and retail food business.
In order to encourage cold storage facilities in the farm sector, Jaitley exempted Service tax on all facilities provided by the state-run National Centre for Cold Chain Development (NCCD) under ministry of agriculture, effective from April 1. At present, the Service tax rate is 14 per cent.
A statement by Jaitley says, “Services provided by National Centre for Cold Chain Development under department of agriculture, cooperation and farmers’ welfare, Government of India, by way of knowledge dissemination, being exempted from service tax, with effect from April 1, 2016.”
Further the minister in his speech said that to promote use of refrigerated containers, the Budget proposes to reduce the basic Customs and Excise duty on them to 5% and 6% respectively from 10% and 12.5%. “Concessional 5% Basic Customs Duty as presently available under project imports for cold storage, cold room (including for farm level pre-cooling) being extended for ‘cold chain including pre-cooling unit, pack houses, sorting and grading lines and ripening chambers’ also. Excise duty on refrigerated containers being reduced from 12.5% to 6%.”
Meanwhile, the minister announced the decision to levy a cess on taxable services for agriculture welfare. He said, “Further, I propose to impose a cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services, proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. The cess will come into force with effect from June 1, 2016. Input tax credit of this cess will be available for payment of this cess.”
Jaitley has further announced Excise duty on waters including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored being increased from 18% to 21%. The industry experts feel that this will lead to prices of colas going up 1-2%. During last budget as well, Excise on fizzy drinks and water went up to 18% from the earlier 17.5%.
Riyaaz Amlani, president, National Restaurant Association of India, stated, while reacting to the Budget, “The Union Budget 2016 was largely agrarian in nature and the restaurant and F&B sector was looking forward to some impetus. While we had also hoped for some announcement on implementation of GST, the industry will be impacted to a limited degree by the increase of service tax, through the introduction of 0.5% agri cess. However, the decision to circulate the Model Shops & Establishments Bill to state governments for voluntary adoption is a welcome move and we hope to see some traction on it.”
The government also announced creation of one unified agri market. Krish Iyer chairman, FICCI Retail & Internal Trade Committee, and CEO & president, Walmart India, said that the government’s proposal to create e-market for farmers through ‘Unified Agri Marketing platform’ is very bold and forward looking and will positively impact country’s farmers. “We will continue to strengthen our Direct Farm programme to complement government vision to make a difference to the lives of our millions of farmers.
“The continued focus on ease of doing business, as highlighted by finance minister Arun Jaitley augurs very well for the industry. Recognition of retail trade as the largest service sector employer in the country and proposed focus to simplify the regulations for retail sector is very laudable. The retail sector in India is currently the hotbed of economic growth. The sector has made noteworthy progress over the last two decades, with rise in disposable earnings, shift in youth populous and an attitudinal shift in consumer preferences. India is a domestic consumption driven growth story and therefore this support & encouragement to the retail trade will surely further drive consumption, which in turn will help manufacturing sector and job creation.”
“The announcement by the finance minister to allow small & medium shops to open all seven days of the week is very encouraging. I also commend the government announcement to circulate a Model Shops and Establishments Bill, which can be further adopted by the state governments.”
“The decision by the government to allow up to 100% foreign direct investment (FDI) through FIPB in marketing of food products produced and manufactured in India is very progressive and will help in reducing wastage, helping farm diversification and encourage industry to produce locally within the country. This far-reaching reform will benefit farmers, give impetus to food processing industry and create vast employment opportunities,” he said.
