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PHD Chamber suggests preferred policy option on food processing sector
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Our Bureau, New Delhi
November 25 , 2014
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The preferred policy option should be imposed on the food processing
sector; the rate of goods and service tax (GST) should not exceed four
per cent, and the farm sector should be kept outside the scope of GST.
These were suggested by PHD Chamber of Commerce and Industry president
Sharad Jaipuria.
“The likely implementation of GST at more than
20 per cent on food processing sector would not only impact the sector
adversely, but also hit the economic and social sentiments of the
country,” he added.
The food processing industry is still at a
nascent stage of development in our country, as only 2.2 per cent of the
food output is processed in India, as compared to 78 per cent in the
Philippines, 65 per cent in the United States and 23 per cent in China.
“At
this juncture, the high rate of GST would slow down the growth
trajectory of the food processing sector in India. Further, as food
comprises a major part of the Wholesale Price Index (WPI), which is
nearly 14.3 per cent, an increase in tax on food items would adversely
impact the WPI leading to higher inflation in the country,” Jaipuria
said.
“We believe that since food constitutes a large portion of
the consumer basket of lower-income households, any tax on food would be
regressive in nature. Further, extending GST to the food processing
sector would also cause difficulty in view of the fact that production
and distribution of food is largely unorganised in India,” he added.
“On
the global front, most of the countries tax food at a lower rate
keeping in view the considerations of fairness and equity,” Japiuria
stated.
“Even in countries such as Canada, the United Kingdom
and Australia, where food constitutes a relatively small portion of the
consumer basket, food is taxed at zero per cent. And in countries such
as Singapore and Japan, food was taxed at a standard rate, which was as
low as three per cent, at the inception of GST,” he added.
“Even
in international jurisdictions, no distinction is drawn on the degree
of processing of food. Hence, the benefit of lower or zero tax rates
should also be extended to all food items in India, regardless of the
degree of processing,” Jaipuria said.
“Going ahead, a lower GST
on processed foods would benefit not only the growth of the food
processing sector in the country, but also the society at large,” he
added.
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