The rate of GST on processed foods should be kept low or at zero as the country cannot afford to have high taxes, with food inflation already over 6 per cent, industry body CII on Wednesday said.
There should be a parity in taxes between processed and unprocessed food products, otherwise the very benefit of processed foods will not reach the consumers because of the price difference, it said.
The Goods and Services Tax (GST) Constitutional Amendment Bill was passed by Parliament earlier this month and so far more than five states including, Gujarat, Bihar and Jharkhand, have ratified the bill. The Centre plans to roll out GST from April 1, 2017.
Once implemented, GST will subsume excise, service tax and other local levies, will create one market for seamless transfer of goods and services across the country.
“GST on processed food products should be kept either lower or at zero level. To ensure more processing happens, taxes should be kept low. Otherwise, food prices will go up,” Confederation of Indian Industry (CII) National Committee on Food Processing Industries Co-Chairman Piruz Khambatta said.
While the government is yet to decide on the GST rate, the CII has recommended the government to keep the rate on processed food items in three slabs keeping in mind consumers of different income-groups, he told reporters here.
“Most of the countries in the world have lower tax on lot of foods, while their inflation is within 2 per cent. Thus India being country with inflation level of 6 per cent could not afford to have higher GST for food items which constitutes major portion of Consumer Price Index,” said Khambatta, who is also Chairman and Managing Director of Rasna Pvt Ltd.
According to CII, GST rate should be kept at a zero level on those processed food products which are essential for survival of ‘poor man’.
There should not be tax on all packaged food items bearing maximum retail price (MRP) up to Rs 10, on those processed foods which help to process perishable fruits, vegetables and dairy products and all all packaging materials which are inputs to the food processing.
In the second category, the CII has suggested a GST rate of 8-10 per cent on processed foods consumed by ‘common man’ and on those packaged processed food products which are priced more than Rs 10 but less than 20.
It also said the GST rate should be kept lower on processed food products which attract lower CENVAT and VAT.
In the third category, Khambatta said the government should keep a standard GST rate of 20 per cent for high-end processed food products and all packaged food bearing MRP of more than Rs 20 but less than Rs 20.
After the bill is ratified by the states, Parliament will have to pass two legislations — CGST and IGST — detailing the new tax code. This could happen in Winter Session of Parliament in November. Similar tax laws will also have to be passed by the states.