Date:05/10/2005 URL: http://www.thehindubusinessline.com/2005/10/05/stories/2005100503451900.htm

Back `VAT hurts food processing industry in AP'

K.V. Kurmanath

Hyderabad , Oct. 4

THE food processing industry in Andhra Pradesh is feeling the VAT (Value Added Tax) heat.

"Major inputs like vegetables and fruits are not taxed. But the end product is taxed at 12.5 per cent. This is totally unfair," Mr Y. Vidya Sagar, Managing Director of Southern Citrus Products Private Ltd, told Business Line.

Though the industry got compensated (input tax credit) for the tax outflows, inordinate delays in payments were a cause for concern. "Money gets blocked in the process. This is hurting the industry. The Government should look into the problem," he said.

As a result of this anomaly, the buyers preferred to source their needs from the other States where they charge the products at four per cent.

Mr Vidya Sagar also made a representation to the State Government, asking it to put all agro-based and food processing products in `nil VAT' category or in the four per cent bracket.

Apart from VAT, the industry also suffered from high rates of Central Excise Duty and Import Duty, Mr Vidya Sagar, who presented a paper on `Prospects for value addition to horticulture crops in Andhra Pradesh' at the national workshop on `Value addition to food - Fruits and vegetables' held here on Saturday.

He appealed to the Government to have a relook at Central Excise and Import duties and rationalise the same to protect the interests of the local industry.

"For example, a common fruit product like pectin attracts 16 per cent Excise Duty. But ironically, the end product, jam, does not attract any duty. So, many manufacturers prefer to buy imported pectin on which no Excise Duty," he said.

Import Duty too proved to be a major irritant for the local industry. "Though we are able to match imported pectin or lime oil, we are finding it extremely difficult to market our products due to cheaper imports being dumped here," he said.

The import duty had been slashed to 30 per cent from 120 per cent in the post-WTO (World Trade Organisation) regime, putting the small-scale units in the country at risk. "Substandard processed foods are being dumped at very cheap prices. Some sort of protection is required to enable the processor and farmer to survive," he felt.

He wanted the import duty to be at 60 per cent on agro and food based products where the country was self-sufficient.