Home >Industry >Retail >Industry body AIFPA pushes for lower GST rate on packaged snacks and foods

Food processors have asked for lower and equitable goods and service tax rates on packaged snacks such as potato chips and pickles ahead of the GST Council meeting next month.

The industry has reiterated its request through the All India Food Processors’ Association (AIFPA), which represents large firms such as Haldiram’s, PepsiCo, Marico, Britannia, ITC and Bikanervala.

In a letter to the finance ministry, the association has sought lower tax rates for what it calls “commonly used food products" such as packaged or branded pickles, chutneys, sauces and fruit drinks, along with branded snacks such as namkeen, bhujia, and potato and banana chips.

Currently, the GST on these is 12%, but processors want them to be put in the 5% slab.

The letter comes amid reports that the government is considering merging the GST rates of 12% and 18% into a single slab. This was reported by Mint on 19 February.

The companies fear that the creation of a new tax bracket could increase their tax burden and invariably their cost to consumers.

India has four primary GST rates of 5%, 12%, 18% and 28%, apart from a cess on luxury and demerit goods such as automobiles, tobacco and aerated drinks.

The letter said branded or packaged snacks, namkeens, bhujias and potato chips are in the 12% GST slab, as are ready-to-cook products such as instant noodles. But, it said, these are eaten by all segments of society and are not elitist products. They are served at roadside stalls, community festivals, places of pilgrimage and institutional messes to common citizens, AIFPA said.

Meanwhile, unbranded snack foods are charged 5% GST, and this creates an anomaly in the sale of processed foods in the country, it said.

“This anomaly has created huge complexities and encouraged the production of unsafe and unhealthy unpackaged food in the market. Contrarily, covid-19 has shown us a road map to encourage the use of safe packaged food and not unpackaged food. In fact, a shift of consumption from branded to unbranded foods reduces revenue to the government and proves counter-productive," AIFPA said.

“The principal argument is to keep us in the lowest tax slab. That is the norm in countries all over the world," said an executive at a large foods company on the condition of anonymity.

India’s fast-moving consumer goods industry is built around high spends on foods. In terms of value, foods contribute 57% to FMCG sales, according to market researcher Nielsen. These include staples such as pulses and rice, but also namkeen, cookies, chips and beverages.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperMint is now on Telegram. Join Mint channel in your Telegram and stay updated with the latest business news.

Edit Profile
My ReadsRedeem a Gift CardLogout