The latest GST council decisions came as a mixed bag for industry even as several of them hailed the government move to announce clarifications around the exact rates that would apply on several items including carbonated fruit beverages of fruit drink, pure henna powder, and tamarind seeds.
FORTIFIED RICE KERNEL
B V Krishna Rao, Pattabhi Agro, a rice miller in Kakinada, told BusinessLine that the reduction in GST of fortified rice kernel from 18 per cent to 5 per cent for Integrated Child Development Scheme (ICDS) is a “right move” and would help industry to promote its products across the spectrum.
Rao said that there was an ambiguity in the rules on the GST rate to be applied ( some were bidding for tenders at 18 per cent and some at 5 per cent) and now there is clarity from the government that the rate will be 5 per cent. “This will give a level playing field for all manufacturers across the country”, Rao said.
Fortified rice is a new item under GST that has come in the last three to six months, especially after Food Corporation of India has started to push fortified rice across the food chain.
FOOTWEAR, TEXTILES
The GST Council has agreed to bring in GST rate changes to correct the inverted duty structure on footwear and textiles from January 1, 2022. This had been a longstanding issue for the sector.
As the textile sector attracts different GST rates for different components, one has to see where the rates stabilise for different items, said Sanjay Jain, Chairman, National Textiles Committee, Indian Chamber of Commerce (ICC). “There is a mixed feeling in the industry on the government’s decision to correct inverted duty structure. To correct the inverted rates, the GST may go up for some items and down for others,” Jain pointed out.
Ramesh Kumar Dua, Managing Director, Relaxo Footwear said the move to correct the inverted duty structure in footwear industry will help bring in more transparency in the sector, prevent evasion and at the same time help ease the challenges faced by the industry with regards to getting refunds.
ORES and CONCENTRATES
Reacting to increase in GST rate from 5 per cent to 18 per cent on iron, manganese, copper, nickel, cobalt, aluminum, lead, zinc, tin, chromium- ores and concentrates,
Sanjay Aggarwal, President, PHDCCI said that it may have a crippling impact on prices as rationally the rate of 12 per cent should have been considered to avoid the inverted duty structure.
“While the industry had pinned high hopes for a constructive decision to include the petrol and petroleum products in GST, the same has again been given a miss in the GST Council meeting of today. It would have been prudent to include them under the ambit of GST to pass on the benefits to end consumers,” he added.
E-COMMERCE
Abhishek Jain, Tax Partner, EY, said, “The e-commerce operators like swiggy, zomato etc would need to raise their own invoices and deposit GST to Government even if the actual resturant supplier is not liable to pay GST due to its turnover being below threshold limit. The move might help in increasing GST collections from restaurant supplies by shifting the taxing duty on established business players instead of small restaurants"
Talking about the decision on the food delivery apps to be made liable to pay taxes on restaurant services, CAIT Secretary General Praveen Khandelwal this was much awaited decision and a high level of tax evasion will be curbed. He said that food delivery is a service and therefore ought to be brought under the purview of GST. He said the industry body was raising this demand since a long time and the GST council has taken a pragmatic decision .
ONCOLOGY MEDICINES
Harsh Mahajan, President, NATHEALTH, said that reducing GST on oncology medicines from 12% to 5% is indeed a step in the right direction. Incidence of cancer has risen exponentially in the last few decades, and while we have made a lot of progress in providing best-in-class cancer treatment available to the Indian citizens, however, the mortality rate still remains high. The announcement will reduce the price of oncology drugs significantly, which will make cancer treatment more affordable and accessible.
FIZZY FRUIT DRINKS
The GST Council has also clarified that "carbonated fruit beverages" and "carbonated beverage with fruit juice" will attract a GST rate of 28 per cent and compensation cess of 12 per cent putting it at par with aerated beverages. This had been so far a contentious issue for the industry players and taxation authorities.
The fizzy fruit segment is still relatively a smaller segment with Parle Agro being one of the leading players with products such as Appy Fizz. Soft drink biggies such as Coca-Cola and PepsiCo had infact begun focusing on this segment after the government had urged them to add fruit juices to their products to help Indian farmers increase sales of fruit produce.
Analysts said that companies are likely to hike prices on bigger SKUs of fizzy fruit drinks while keeping the entry price of Rs 10 unchanged.
This development also comes at a time when the Indian Beverage Association had been pleading for a GST rate cut on the overall carbonated beverage segment ( 40 per cent GST) as its not a luxury or sin product.