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Indian food processors ask for one VAT rate across state boundaries

By Ankush Chibber , 18-Nov-2011

Food processors in India have asked the authorities for rationalization of Value-Added Tax (VAT) rates in the country’s next budget, which is expected to be announced in February or March next year.

According to the All India Food Processors' Association (AIFPA), the body has written to the Ministry of Food Processing Industries (MOFPI) to take these concerns to the empowered group of ministers of the finance committee.

In the communication, the AIFPA says that while it understands that VAT levy falls under the jurisdiction of the state governments, its members have been affected in the last 12 months or so because of unnecessary rate amendments due to individual state interpretations of VAT regulations.

Fix VAT at 4% across state lines

The AIFPA is urging that VAT on all food products should be taxed at 4% throughout the country, and that this rate should apply to products which have seen their rates meddled with recently.

The trade body said that the lowest applicable rate of 4% should be applied to packaged drinking water as well, which is a food product, but has been not considered so by several state governments.

In addition, the AIFPA said that the 4% rate should also be applicable to fruit juice and fruit juice-based drinks.

The food industry representative group also said that it was aware of some state governments, like those of Maharashtra and the National Capital Territory of Delhi, hiking the VAT rate on carbonated soft drinks, and said that this defies logic.

Amongst others, the AIFPA demanded that the VAT for soya processed foods, including but not limited to soya edible flour, granules, textured soya protein, soya milk, and tofu should also be set at a uniform rate of 4%.

To date, the body argued, VAT on soya food products varies from 4% to 12.5% in various categories and in various states of India, which results in a complicated situation for soya food processors.

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