GST takes the steam out of branded rice

R Balaji | | Updated on: Apr 20, 2018

Millers are rueing that branding of non-basmati rice in the southern States has been effectively wiped out by the levy of GST on branded rice.

Unregistered brands stay outside GST with a clear disclaimer on the packaging, but this means brands lose their individuality. Any rice mill can use any trade name or brand and it has become quite common for a number of rice mills to use the same brand if it was popular in a local market.

Effectively, branding has lost its meaning in the non-basmati rice segment, say industry representatives.

Prior to the levy of GST, rice was largely not taxed under VAT in the South — the major rice consuming centre. Milling technology had been upgraded and mills were moving towards branding over the last decade.

Many brands

Unlike in major processed food segments where brands span large geographical areas, in the non-basmati rice segment innumerable brands came up with each being a dominant player in regional markets.

Each district in the State will have a number of brands, said AC Mohan, Secretary, Federation of Tamil Nadu Rice Millers and Paddy, Rice Dealers Association.

Of the large number of brands, possibly 1-2 per cent were trademark or Agmark registered. But with the levy of GST, rice traders are reluctant to stock registered brands because of GST implication. They deal in branded and unbranded varieties and this was the complication.

Mohan says millers have stopped using registered brands and market rice with the mill name or a generic name. For instance, there are over a dozen mills marketing rice under the ‘Apple’ brand in Chennai and elsewhere in Tamil Nadu, he remarked.

However, there are still a couple of popular brands in southern districts that are now restricted only to organised chains of retailers or large department stores.

NR Vishwaradhya, Executive President, Karnataka State Rice Millers Association, said efforts by some modern mills to add value to non-basmati rice had been stifled by this levy. With the loss of trade protection more than one mill can offer a brand in the market.

Uniform tax slab

Millers had even suggested that the government levy a low rate of tax uniformly rather than distinguish between branded and non-branded varieties.

Amara Visweswararao, President, Tamil Nadu Food Grain Merchants Association, and a leading wholesaler, said millers with registered branded rice had attempted to add value by purchasing adequate stocks for ageing the rice, processing with new machinery. They did get a couple of rupees margin over unbranded. But the gap is now ₹7-8 a kg and that sort of a price gap cannot be managed in rice.

Published on April 20, 2018
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