The Hindu Business Line : Budget wishlist: FMCG cos hope for VAT, excise duty exemptions

Anticipating the implementation of the Goods & Service Tax and doing away with the FBT are other incentives the FMCG industry is looking forward to.

Purvita Chatterjee

Mumbai, June 30

An increase in the Budget outlay for the rural sector, abolition of fringe benefit tax (FBT) and complete exemption of central sales tax are some of the issues which are on the wishlist of FMCG companies before the Budget.

In fact, FMCG companies fear an increase in excise duty on segments such as cigarettes by 5 per cent and a possible roll-back of excise duty cuts given in the past stimuli packages.

Even the biscuit industry which has been exempted from central excise duty for brands with MRP below Rs 100 a kg is looking at further exemption in central excise duty and VAT on segments such as cakes, biscuits and cookies.

Mr B.P. Agarwal, President of Indian Biscuits Manufacturers’ Association and CMD, Surya Food & Agro, said, “We are requesting for exemption on central excise duty and VAT on cakes, biscuits and cookies. The small and medium sector biscuit industry consisting of around 150 units (besides three large firms), are facing erosion in their profitability and competitive capability due to the heavy burden of taxation (VAT of 12.5 per cent and central excise duty of 8 per cent), which is a major problem compounded by additional levies by certain State governments.”

Breakfast cereals, which also had excise duties lowered from 8 per cent to 4 per cent, is looking at further reductions this year. “We would like excise duties to be further dropped or exempted as we are in the ‘good’ food category. VAT too, should be uniformly applied,” says Mr Anupam Dutta, Managing Director, Kellogg’s India.

Other incentives

Anticipating the implementation of the GST (Goods & Service Tax) and doing away with the FBT are other incentives the FMCG industry is looking forward to. According to M. Dalip Sehgal, Managing Director, Godrej Consumer Products, “The Budget should be GDP growth-oriented. Providing fiscal stimuli where growth rates are running low could be very helpful. Even if agricultural growth is poor, we could end up with a good year. “The FMCG sector has benefited from the excise duty cuts announced as part of the stimulus package before the elections. We hope that it is not rolled back. In addition, the FMCG sector will benefit if the Fringe Benefit Tax is done away with. Implementation of GST as scheduled on April 1, 2010, will help both the consumer and the industry.”

“I would like to see the budget further build on interventions to reduce prices on the one hand, while leaving a few extra rupees in consumers’ pockets on the other. This combination will help to not only sustain but also fuel demand - and that is at the heart of helping the economy to recover,” said Mr Anand Kripalu, President, Asia, Cadbury.

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