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As the levy of five per cent GST eats into the sales of branded staples, manufacturers want the Centre to reconsider its decision and exempt such products — mostly rice, dal and wheat items — from the tax.
Trade in these staples operates at wafer thin margins of 1-2 per cent. “These staples were not taxed in the old VAT regime in many of the States,” sources said. However, the levy of 5 per cent GST has made these brands expensive to such an extent that stockists and distributors shun such products, putting manufacturers and processors in a quandary.
This has forced many a manufacturer of wheat products and processor of rice and dal to de-register their brands and market their products under different brand names and logos.
“A majority of the manufacturers have given up their actionable claims on their company names and brands. The registered brands, built over decades are finding it difficult to charge 5 per cent tax when competitors are selling their products without any levy. As a result, millers are faced with a situation of shutting down operations if they continue to use their brands or give up their actionable claim on any brand name printed on their bags,” sources said.
Such a trend will lead to counterfeits making their way into the markets, posing risks for the consumer health and food safety, the sources said, urging the government to exempt from GST the sales of packaged staples such as rice, dal and wheat products or impose a uniform tax on all such products irrespective of how they are packaged or branded.
The GST Council is scheduled to meet on November 10 to review tax rates on some items.
Trade sources also argue the recent developments relating to branded staples were against the government’s own policy of encouraging businesses to build brands and compete globally.
Though the packaged staples account for around three per cent of the total sales of products such as rice, pulses and wheat products, the category has been witnessing growth in the recent past, driven by increasing consumer awareness and demand.
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