The Hindu Business Line : Biscuit manufacturers seek reduction in taxes

Mr B.P. Agarwal (left), President, Federation of Biscuit Manufacturers of India, with Mr Ranjit Sawhney, Vice-President, addressing a press conference in the Capital on Wednesday. — Kamal Narang

New Delhi , Feb. 15

COME March 1, biscuits are likely to cost a tad more.

Biscuit manufacturers today said they might resort to price increase if the forthcoming Budget fails to bring them excise relief.

"The high rates of taxation coupled with the steep increase in the prices of inputs like wheat flour, sugar and vanaspati has adversely affected our margins. We will have no option but to look at price increase if excise duty is not done away with on February 28," Mr B.P. Agarwal, President, Federation of Biscuit Manufacturers of India (FBMI), said at a press conference here today.

The FBMI seeks removal of the prevailing 8 per cent excise duty on biscuits. The federation also reiterated its demand for reducing value added tax (VAT) on biscuits to 4 per cent from 12.5 per cent.

The VAT panel had, however, recently indicated that it was not in favour of any rate changes at the fag end of the current fiscal.

Mr Agarwal said taxes on biscuits, including central excise duty, value added tax and other State-level levies, stood at about 26 per cent (after set-off and credit the burden is about 20 per cent).

"Biscuits are one of the highest taxed segments in the country," he said, adding that many biscuit-manufacturing units may have to shut down or further reduce capacity if the tax burden remained unchanged.

Asked if the manufacturers would pass on the benefits of excise duty cuts, if any, in the budget to consumers, Mr S.S. Shivrain, General Manager, Parle Biscuits, said, "if the Finance Minister obliges us, we will oblige our customers".

Some biscuit manufacturers had cut retailers' margins to counter the pressure on profit margins from higher tax burden. Mr Agarwal said biscuit production had surged 18 per cent in 2004-05 after the excise duty on biscuits was brought down to 8 per cent from 16 per cent. However, in the current fiscal, after the introduction of VAT at 12.5 per cent, biscuit production was growing only at 5-8 per cent.

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