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Reduce VAT To 4% From The Steep 12.5%- Biscuit Industrys

Reduce VAT To 4% From The Steep 12.5%- Biscuit Industrys

New Delhi, Wednesday 9 May 2007 Imposition of Value Added Tax (VAT) at the highest rate of 12.5% on biscuit has hardly hit the sector especially the small and medium segment. Higher VAT is resulting in low demand pick-up and subsequent losses to the biscuit industry.
While addressing a Press Meet today in New Delhi. B P Agarwai. President. Indian Biscuits Manufacturers’ Association (IBMA) said that the Association has submitted representations to the Chief Ministers/Finance Ministers of all State Governments, as also to Mr Asim Dasgupta, Chairman, Empowered Committee on VAT, with the plea to reduce the rate of VAT on biscuits to 4%.
“Biscuit is a merit good and is a nutritious snack food hygienically processed & packaged. It is available at very reasonable prices and consumed predominantly by children as almost a staple food/breakfast. Economically weaker sections of the society consume biscuits The recent findings of National Sample Survey Organization (NSSO) lend credence to the fact the low income group’s demand for goods like milk, fruits and the food items of similar ilk are incree.°;ng more than the demand for cereals and grains.” says Mr Agarwai Fiscal policies should be accordingly tailored to ensure greater consumption of these goods among the low-income group, he added.
IBMA Chief added that, biscuit is a part of the food processing industry. recognized as a thrust area by the Government of India. Higher consumption of processed food including biscuits will lead to greater demand for agro products, !ihc v/hoat, vegetable oil, sugar rnilk etc. Thus, growth in production and consumption of biscuits would benefit the farmers of these agro products. However, sharp increase in the prices of wheat / Maida, vegetable oil sugar etc has already hiked up the cost of production. Biscuit is also subjected to various other local levies, such as Purchase Tax, Entry Tax / Octroi etc. There are taxes/duties / cess etc on ingredients of biscuit, packaging material, equipment etc.
While appreciating the-increase in the threshold limit for Excise Duty exemption for biscuit from MRP upto Rs.50/- to Rs.100/ kg, announced by the Finance Minister on 3 May 2007, Mr Agarwal said that IBMA has strongly pitched for reviewing the Budget proposal since the earlier proposal was to restrict excise exemption for biscuit upto MRP of Rs.50/- per kg. This would have benefited only one or two large industrial houses, to the detriment of more than 140 Small & Medium enterprises in the biscuit industry.
Mr B P Agarwal mentioned that, recognizing the need to encourage biscuit manufacturing, the State of Tamil Nadu, which has recently introduced VAT, has fixed rate of 4% on biscuits. Similarly Assam is also levying VAT @ 4% on Biscuits. Other State Governments should also favorably consider IBMA’s representation for fixing 4% VAT on biscuit
According to the IBMA President, similar food products like Wafers, Bhujia, Namkeen, Bread, Fruit Juice, Jam, Jelly, Potato chips, Ice Cream etc are either exempt/or levied VAT at 4%. Even a luxury item like dry fruits is exempt/or at 4%, from VAT. However, biscuit – common man’s snack food, hygienically made & packaged available reasonable prices- is subjected to VAT at 12.5%
Mr Agarwal informed media that biscuit manufacturing is highly employment oriented and mainly consist of SMEs. Biscuit industry in the country, directly and indirectly employs more than 25 lakhs workers, and therefore, deserves sympathetic consideration by the State Governments, especially with regard to levy of Value Added Tax at the minimum rate of 4%.
Biscuit, which is high volume agri-based product, operating under highly competitive environment with the characteristic very thin margin of profit, predominantly in the SME sector is subject to highest level of taxation, making the survival of the firms highly difficult.
“In our communications and oral submissions before Chairman and Member Secretary of the Empowered Committee and also to the State Finance Ministers, we have apprised them about the pernicious effect of the higher VAT on biscuits. Some of the State Governments have already acted on it. We hope that the Empowered Committee on VAT will favorably decide our case salvaging the labor intensive biscuit industry.” says Mr Agarwal.
For further information, please contact Mr.K.P.Mohandas, Secretary General, IBMA (Mobile No. 9818857709) or Mr.Joseph Thachil, Media Advisor (Mobile No. 9810516770).

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