GST regime: Food industry happy at lower levy, but branded wheat players sore

The food and meat processing industry on Friday largely welcomed the new tax rates announced at the GST Council meeting in Srinagar, but some of them are concerned about certain GST fitment rates.

While foodgrains and raw food items were exempted from tax, most processed products will attract lower taxes than the existing rates.

“We will benefit from the decision as ready-to-fry products will attract only 12 per cent, against 14.5 per cent that we pay currently in most South Indian States where we operate,” says Srinivas Shenoy, a senior official with the ₹300-crore Abad Fisheries Private Limited, in Kochi. In Karnataka, it is even higher at 15.5 per cent, he said.

“The fitment of a GST rate of 5 per cent on edible oils as approved is more or less on expected lines. However, a GST rate of 12 per cent on soya bari and 5 per cent on soya flour comes as a disappointment,” said Dinesh Shahra, Founder and Managing Director of Ruchi Soya Industries Ltd.

“We hope that the government will relook at the GST rates on texturised vegetable proteins, commonly known as soya bari, and soya flour and bring them to the tax-exempt category to promote the use of soya protein to prevent and treat protein malnutrition in the country."

Soya protein is the least expensive and nutritionally the most valuable and economical protein.

Neutral impact The impact of GST rates on farm products such as edible oils, tea and coffee is seen as neutral, with no major impact on the end-prices for consumers, while a zero-tax on unbranded wheat products such as atta, maida and sooji may make them cheaper.

“The rates that we now see may not have any major impact on the retail prices of edible oils. For the industry, the GST rates are more or less in line with the expectations," said Atul Chaturvedi, president, the Solvent Extractors' Association of India (SEA).

A 5 per cent GST on branded wheat products could make them marginally expensive as the industry may chose to pass the tax burden to consumers. However, a zero tax on unbranded wheat products could make them cheaper. In the current tax structure, various States have levied a tax of 2-4 per cent on wheat products.

“Wheat is a staple food for everybody. It is heartening to know that the government has exempted wheat and unbranded wheat products from GST. But given the consumers’ preference for food safety law-compliant products, such a move will be dampener on the branded players. They will pass on price hikes to consumers," said AN Gupta, former chairman of Wheat Products Promotion Society. Players in the plantation segment such as tea and coffee said the 5 per cent levy was on expected lines and that it would not have any impact on consumers.

(With inputs from Bengaluru, Kochi and Ahmedabad bureaus)

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