In view of the continued lack of support from the GST Council, experts from the food processing industry feel that the sooner government rationalises the taxes for food processing, the better it will be for the industry to stand firm on its feet.
Experts are of the opinion that the final Budget of the Union government must ensure rationality in tax regime for food processing industry, if it genuinely wants to double the farmers’ income in the country.
“You can’t have double standards. On the one hand, you want to double the farmers’ income, and on the other, you are putting 12% tax on basic processing like fruit pulp, pickling etc,” said an industry expert, while adding that GST (Goods and Services Tax) in the present form appeared to be a camouflage that aimed at taking down the Indian MSME (Micro, Small and Medium Enterprises) sector.
Stressing on rationalisation, Dr Subodh Jindal, president, All India Food Processors’ Association (AIFPA), stated, “The industry has long been demanding rationalisation of the taxes under GST for food processing but the appeal is falling on deaf ears.”
He explained, “There is no point in putting basic processing like pulp, pickle, jam, jelly, dehydrated fruits and vegetables, murrabba etc. under 12% rates. The pulps etc. should be put under nil rates at par with the fresh fruits and vegetables. Not only that, all food preparations, packaged and processed, should not attract more than 5% tax.”
Further, industry chamber CII in its pre-Budget memorandum for food processing also pitched for rationalisation. Many food products like ghee/butter, it says, should be placed at 5% from its current position of 12%, staple food which currently attracts 5% tax should have nil rate, fruit-based confectionery containing fruit pulp, however, classified whether under Chapter 1704 or 2007 should come under 5% from its current position of 18% slab.
Breakfast cereals should be placed at 12% from its current position of 18%. Preparations of vegetables, fruits, nuts or other parts of plants/all products under Chapter 20, should be put in 5% from the current 12% tax slab. All convenience instant food mixes such as idli mix, vada mix, dosa mix, gulab jamun mix, thandai mix, payasam mix, upma mix, etc. should also be brought down to 5% from 18%, fruit beverages, wherein clarification is required whether fruit beverages containing fruit juice with aeration should stay in this entry, is recommended slashing from 12% to 5%.
The recommendation also states that the benefit of composition scheme should include small ice cream manufacturers, which is currently attracting 1% tax.
Meanwhile, economists feel: “Given that India is a large producer of a number of agriculture products, has positive trade balance in this sector, has a large population dependent on agriculture, has small farm holdings and still growing farmers’ unrest therefore food processing and agriculture sector is expected to get significant attention in the forthcoming Budget.”
In conclusion, Arpita Mukherjee, professor, Indian Council for Research on International Economic Relations (ICRIER), observes that to help increase farmers’ income, the government needs to focus on allocation of funds to: (a) Agro-processing clusters for exports; (b)Cultivation and processing of quality herbs and organic products;
(c) Support private initiatives such as agri e-commerce platforms to reduce infrastructure and logistics related inefficiencies and ensure availability, affordability and quality of food to consumers, through which farmers can directly be linked to their consumers and have the best price realisation;
(d)Crop insurance policy and use of technology such as block chain for crop insurance; (e) Supporting initiatives for sharing information with farmers on sustainable agriculture practices, use of right chemicals and pesticides, and export requirements of key export markets. And (f) Supporting schemes for agri-startups.
