Food cos write to FM Nirmala Sitharaman as GST fears mount

The All India Food Processors’ Association (AIFPA), which has members such as ITC, Mondelez, Haldiram, Bikanervala, PepsiCo, Nestle and various small and mid-sized foods companies, has written to Finance Minister Nirmala Sitharaman citing ‘anxiety among food industry on the recent proposition for raising GST rates.’
The letter comes just days ahead of a GST Council meeting on December 18. “The industry has been struggling to maintain its operations under severe financial constraints and any increase in GST rates will hit the sector very hard to the detriment of the farmer, industry and Government,” the letter, signed by AIFPA president Subodh Jindal, states. ET has seen a copy of the letter.
Food categories including branded snacks, instant mixes, ready-to eat products, pickles and namkeens are currently are taxed at 12%. “Industry has been constantly requesting you to shift food products currently taxed at 12% to 5%. The government has not so far agreed to this request and now, on the contrary, the industry is faced with the unjust proposal of increasing GST rates,” the letter, dated December 12, reads.

There is widespread speculation that rate increases will be announced at the GST Council meeting on December 18 on diverse categories including processed foods, healthcare services and mobile phones. Presently, all products and services fall under four tax slabs – 5, 12, 18 and 28%. An upward revision of the slabs would help the government mop up additional revenue of Rs 1,000 crore a month.
Domestic consumption of FMCG products, which include foods, has slowed significantly across channels over the past 12 months, especially in rural markets where it fell to a seven-year low in the July-September quarter, at 7.3% by value from 16.2% a year earlier, Nielsen said in a report in October.
The outlook for companies selling everyday household items remains bleak, primarily on account of a distinct slowdown in rural demand owing to lower farm incomes, liquidity crunch, and rising unemployment. GST collections have been lower than expected and the government is looking to boost revenue amid an ongoing economic slowdown.
At a press meet three days ago, Sitharaman maintained that there have been no conversations on tax revisions yet. The Central GST collection fell short of budget estimates by about 40% in the April-November period, according to government data. The letter by AIFPA also says there is “incongruency” in levying 12% GST on branded snack foods compared to 5% for unbranded snack foods. “This anomaly has been increasing complexities for the industry and encouraging production of unsafe, unhealthy products. A shift of consumption from branded to non-branded foods reduces revenue to the government and proves to be counterproductive,” the letter adds. The government’s thinking that foods currently placed at 12% GST are elitist is not true, it said.

Source : economictimes.indiatimes