The Hindu Business Line : Higher tax on branded food products dents competitiveness

An over 18 per cent tax on branded processed agricultural products had led to stagnation of processing in fruits and vegetables in the country. Only two per cent of the fruits and vegetables are processed in the country, according to the Associated Chambers of Commerce and Industry (Assocham).

This high incidence of taxation not only acts as a disincentive of processing fruits and vegetables besides affecting its competitiveness.

At least Rs 50,000 crore worth of fruits and vegetables are wasted or allotted to rot or inefficietly used.

Making a case for moderation of tax structure for branded food products, the chambers President, Dr Swati Piramal, said branded food products were subject to Central sales tax, value-added tax and local levies. In contrast, unbranded food products were either exempt or taxed at concessional rates.The Central sales tax on processed food ranged between two and four per cent, while entry tax and Octroi are also levied. Besides, 12.5 per cent value-added tax is imposed on these branded products. Unbranded ones attract a total four cent levy.

The chamber said since branded products carry the brand owner's assurances on quality and hygiene, it is unreasonable to make them more expensive for the consumer by levying a higher tax. Accordingly, all food products should be treated on par in terms of taxation.

The processed food industry should be exempt from service tax on goods transport service/ mass communication and awareness campaign activities, said Dr Piramal. The policy of excluding processed food products from levy of Central Excise Duty, as dealt with in previous Budgets, needs to progressively cover all processed food products. This will actualise the organised food processing industry's potential to generate rural employment, ensure fair prices for farmers, reduce wastages and spread the benefits of economic growth to rural areas, the chamber said.

Sugar confectionery up to a maximum retail price of Re 1 should be exempt excise duty. The food processing sector has a high multiplier effect in terms of allied trades and industries. With every person directly employed in processing, about 100 persons get employment in related functions/ fields, e.g. growing, post-harvest handling, storage, transportation, packaging materials, food ingredients, fuel, utilities, distribution, technology inputs, plant and equipment, testing and analysis, training, research and development, retailing, infrastructure, etc. The employment potential is extremely high, the chamber said.

More Stories on : Foods & Food Processing | Taxation

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Coastal TN rains may signal end to weak monsoon phase

Gold tumbles on Dubai debacle, but investor interest to stay positive

Coonoor tea prices drop on inadequate demand

Gold may test resistances levels

Higher tax on branded food products dents competitiveness

Vanaspati: The health risk factor

Pepper remains outpriced; exports register drop

Where is gold headed?

Govt to impose trans fat limits on vanaspati soon