Cut VAT to zero, says premier Indian body

By Ankush Chibber

- Last updated on GMT

Related tags: Food

Cut VAT to zero, says premier Indian body
Calls for Indian food and beverage industry tax reform are growing louder as the date for the country’s 2012-13 fiscal budget draws near.

The Federation of Indian Chambers of Commerce and Industry (FICCI), India’s top industry body, wants the Ministry of Finance to give special focus to the food processing sector.

FICCI wants the ministry to reduce the 10% central value-added tax (VAT) to 0% for many items and make it uniform across state lines, even popular items such as packaged drinking water and biscuits.

“We are of the opinion that the VAT be brought down in a calibrated manner. It should be brought down to 4% in the first phase and reduced to zero in the second. This way, the revenue impact of such a move can be mitigated,”​ a spokesperson for the body told FoodNavigator-Asia. said.

A similar demand was made in November last year by the All India Food Processors' Association (AIFPA) which complained of logistical issues caused by VAT differences between individual states.

AIFPA made a similar demand regarding packaged drinking water on which it said that the lowest applicable rate of 4% should be applied.

Biscuits?

AIFPA highlighted another problem with the way biscuits are classified and taxed differently in different states.

“As a food product, biscuits come close to bread. But where as bread is virtually exempt from VAT, biscuits are charged anywhere from 12% to 15% depending on the state. We need this to be corrected in the current budget,”​ an Indian Biscuit Manufacturers Association spokesperson said.

FICCI, in its ministry memorandum asked for the doing away of VAT on soy-processed food products, which have been recommended by various medical and health bodies in India.

According to government rules, soy-processed products are charged anywhere from 4% to 12%, which is affecting the production and then consumption of these products. AIFPA had made a similar demand back in November when it asked for VAT for soya processed foods, including but not limited to soya edible flour, granules, textured soya protein, soya milk, and tofu to be set at a uniform rate of 4%.

Other items on FICCI’s VAT reduction wish list infant foods, ready-to-drink beverages such as iced teas, sugar-boiled confectionary, instant noodles, potato chips, conserves and chutneys, ready-to-eat packaged foods, instant mixes and value-added dairy products.

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