Food processing industry urge to reduce GST rates on packaged snacks, foods

Despite a lot of representations made to the government appealing for reduction in GST rates, the food processing industry hasn’t received any satisfactory answer till now. Yet again food industry representatives have requested the Union Finance Minister and the GST Council to cut down rates on packaged snacks, ready-to-cook and ready-to-eat food products besides other commonly used food items, prior to the GST Council meeting which is to be held next month.

In a letter to the finance ministry, the food industry has asked to lower down the tax rates for what it calls “commonly used food products” like packaged or branded pickles, chutneys, sauces and fruit drinks, along with branded snacks like namkeen, bhujia, and potato & banana chips.

Presently, the GST on these products falls in the 12% slab, but processors want them to be in the 5% bracket.

The letter comes amid reports that the government is planning to merge the GST rates of 12% and 18% into a single slab.

The companies are worried that the creation of a new tax category could lead to an increment in their tax burden and invariably their cost to consumers.

India has four main GST rates of 5%, 12%, 18% and 28%, apart from a cess on luxury and demerit goods such as automobiles, tobacco and aerated drinks.

The letter also mentioned that GST of 12% is levied on branded or packaged snack foods which include namkeens, bhujias, fruit and vegetable chips made of potato and banana etc. but, these are consumed not only by well-to-do sections but also by all segments of society.

At the same time, unbranded snack foods are charged 5% GST, and this creates an peculiarity in the sale of processed foods in the nation, the letter further added.

“This anomaly has created massive complexities and motivated the production of unsafe and unhealthy unpackaged food in the market. On the contrary, COVID-19 has shown us a road map to encourage the use of safe packaged food rather than unpackaged food. In fact, a shift of consumption from branded to unbranded foods alleviates revenue to the government and proves counter-productive,” the letter states.

Sanjay Indani, founder, promoter & head of SafeFoodz Solutions, Navi Mumbai, said, “Most of the countries worldwide have lower tax on a lot of foods, while their inflation is within 2%. Thus, India being a country with inflation level of 6% could not afford to have higher GST for food items which makes up a major portion of Consumer Price Index. The high GST rates on food products have a detrimental influence on the growth of the sector.”