Processed foods body writes to Harsimrat Badal; asks for GST reduction ahead of meet

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Industry body All India Food Processors Association (AIFPA) has written to Food Processing Minister Harsimrat Kaur Badal seeking reduction of Goods & Services Tax (GST) on instant food mixes, ready-to-eat cereals, snack foods, spices, and traditional and ethnic foods. The AIFPA, which represents almost all leading foods companies, has sought reduction of GST on these products from 12% to 5% ahead of the GST Council meet on June 12. “It is an accepted global practice that food products are either exempt from tax or chargeable at a minimal rate. Consumer expenditure on the food basket is 35%-50% for most households and taxes have a heavy impact,” the letter, of which ET has seen a copy, says.

“Covid is likely to create a major disruption in the economic system; agro-food industries will play a big role in the revival process,” the letter, signed by AIFPA president Subodh Jindal, said. The letter comes at a time when packaged foods companies have been witnessing healthy growth as consumers stockpile foods amidst the lockdown.

Britannia Industries, maker of Good Day and Tiger biscuits, reported 26% rise in net profit and a 2% increase in revenue for the March quarter ahead of street estimates for the March 2020 quarter, is back at 100% production capacity except for red zones. Nestle India, which makes Maggi noodles and KitKat chocolates, has resumed operations at all plants, distribution centres and warehouses, the company said in a BSE filing last week, adding that the impact of pandemic on business operations has not been materially adverse so far, but that it would be difficult to assess impact on near term and annual results.

While GST rates on about 200 grocery and daily needs including chocolates had been slashed to 18% from 28% in November 2017, industry executives have been pushing for a further reduction. Biscuits under Rs 100 a kg, for example, are taxed at a GST of 18% and are price-sensitive categories, contributing 40% by volumes of the overall category. 

Crisil Ratings has forecast a reduction of 2-3% in revenues for the year 2020-21for India’s fast-moving consumer goods (FMCG) sector, impacted by supply chain disruptions and exodus of migrant labour amidst the nationwide lockdown beginning March 25, though curbs have been eased starting June. “The sector is expected to de-grow 2-3% this fiscal, a drastic change from our estimate of 8-10% growth made before the pandemic struck,” Crisil Ratings said in a press note. Market research firm Nielsen too has downgraded growth forecast for the sector to 5-6%, against its earlier projection of 9-10%.

Read More at: https://economictimes.indiatimes.com/industry/cons-products/food/processed-foods-body-writes-to-harsimrat-badal-asks-for-gst-reduction-ahead-of-meet/articleshow/76314180.cms