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Companies fear losing out to unregistered foodgrain brands

Companies such as Adani and Cargill selling processed foodgrain fear that the Goods and Services Tax (GST) will encourage traders to sell packets of unregistered brands to avoid tax.

Companies feel households, which have started spending on branded products due to quality assurance and economic growth, will either shift to unbranded commodities or will have to take the tax burden creating inflationary situation.

Similarly, companies making jams and pickles want tax to be lowered from 18% to 5%. “One of the basic principles of GST is one commodity one tax.

In this case there is a deviation by taxing registered packed rice by 5% and providing exemption to unregistered packed rice. This shall encourage traders to pack in unregistered brands to avoid tax and will also impact quality,” said Angshu Mallick, COO, Adani Wilmar.

In the present VAT regime, registered packed rice, wheat flour and gram flour are exempt from tax but in the recently declared schedule of GST rates would be under 5% tax.

“We sell branded, quality and hygienic products, focussing on food safety. The 5% tax will ensure branded, registered commodities — like wheat flour (atta) in our case — will become expensive.

This drive of moving people to safer food gets diluted and is not in sync with government policy of moving towards higher food safety standards,” said Swati Shukla of Cargill India.

Of the 56 million wheat processed to make atta, only 5% is consumed by organised sector. The food industry also feels that with processing levels dismally low at 4-8% for most items, placing them at high tax structure was not good.

Source: Economic Times

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