Friday, October 23, 2009: 06:02:13 PM

Food Processing Press Release

Put processed poods under zero rate to exempt it from central excise after GST adoption: ASSOCHAM

Processed food along with agricultural staples such as atta, rice and dal should be exempted from central excise and be placed under zero rate with the government’s execution of GST

Processed food and all primary agricultural products including staples such as rice, atta and dal should be put in a zero rated category after the government has adopted the Goods and Service Tax (GST). According to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), these products will be escaping central excise.

The representation sent to Union Finance and Food Processing Ministries by Dr Swati Piramal, the ASSOCHAM president, points out that the government wants to increase the processing levels of food products to 10% from the current 2%. This would be possible if the current tax regime is extended after the execution of GST.

The Chamber has, however, proposed that certain processed items such as tobacco products and alcoholic beverages, which currently fall under the category of demerit goods, should be taxed at higher rates to make up for the country’s tax fund.

Dr Piramal said that processed fruit and vegetable products as well as ready-to-eat food products, mithai, namkeen and bakery products should be put in the zero rated category, so that these are exempted from central excise as is the case now after the GST is ready for execution.

In addition, the Chamber has also recommended that all primary agriculture products, including staples such as rice, atta, dal and other food products should be placed under the zero rated category. Other processed food items are recommended to be placed at special State GST rate of 4%.

It has clarified that in case a single GST regime is adopted, the combined GST should not exceed 4%, with primary agriculture products being totally exempted. The ASSOCHAM has further highlighted that this position of GST is revenue positive. With the growth of this sector, the revenue collected by way of taxes on inputs (that is, packaging-materials, food ingredients, plant and equipment, technology inputs and others) is significant and will continue to grow.

The Chamber has also requested the government to consider measures in a sympathetic manner like uniform classification of all processed food products across the Centre and the states as per the Harmonised Systems (HS) Code.

Organisations having operations in various states across the country should be given the facility of single registration and should be allowed to make payments at a single central location. Facilities for electronic filling of returns and electronic payment of dues should also be provided to such organisations.

It is also to be noted that the old procedure of Road Forms for entry of goods is still continuing in some states. This needs to be done away with to ensure faster movement of goods. In certain states levies like Octroi or Cess is still being charged for entry of goods, which should be abolished.  Central sales tax procedure also needs to be withdrawn at the earliest.

India is the largest or second largest producer of food commodities including fruits and vegetables, milk, wheat, rice and spices in the world. However, the potential of this sector for processing has remained very low (at about 2%) as compared to various other countries such as China (27%), the Philippines (78%), Brazil (70%), Malaysia (83%), the US (65%) and the UK (88%).

Lack of proper food processing results in huge wastage of the country’s agri-produce, which is estimated at 35-40% valuing Rs 35,000-50,000 crore annually. A developed food processing industry would help to reduce such wastages and raise farm incomes.

The food processing sector is known to have a very high multiplier effect in terms of allied trades and industries. With every person directly employed in food processing, about 100 persons have the option to be employed in related fields such as growing food crops, post-harvest handling, storage, transportation, packaging materials, fuel, utilities, distribution, technology inputs, plant and equipment, testing and analysis, training, R&D, retailing, infrastructure and other areas.

Friday, October 16, 2009

For further information, please contact:

 

Corporate Office

The Associated Chambers of Commerce and Industry of India

ASSOCHAM Corporate Office, 1, Community Centre Zamrudpur

Kailash Colony, New Delhi – 110 048

Tel: 46550555 (Hunting Line)

Fax: 46536481/46536482 46536497/46536498

E-mail: assocham@nic.in


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