Date:04/01/2006 URL: http://www.thehindubusinessline.com/2006/01/04/stories/2006010402290300.htm

Back Biscuits industry seeks cut in VAT, duty waiver

Our Bureau

New Delhi , Jan. 3

IN an attempt to boost the per capita consumption of biscuits in the country, the biscuit industry has asked for duty waivers and reductions in the tax levels applicable to it. Currently, biscuits are subject to 8 per cent excise duty and a 12.5 per cent value added tax (VAT).

Reduction in VAT levels: The industry has been lobbying with the Government to reduce the VAT levels from 12.5 per cent to 4 per cent claiming that the imposition of VAT has affected the biscuit manufacturers in the country and has consequently resulted in several biscuit units shutting down.

According to Mr B.P. Agarwal, President, Federation of Biscuit Manufacturers of India (FMBI) and Chairman, Surya Agro and Food Ltd, "the imposition of VAT has increased the idle capacity of biscuit units to almost 50 per cent."

It has been argued that biscuit being a highly price sensitive low margin product, the industry cannot pass on the VAT to the consumers and at the same time is unable to absorb the cost escalation.

Mr Agarwal further pointed out that other snack foods such as potato chips, jams and jellies, attract a lower rate of the VAT, while biscuitsare subject to 12.5 per cent VAT.

Echoing similar sentiments, Mr Neeraj Chandra, Head - Sales, Marketing and Innovation, Britannia Industries Ltd, said: "40 to 50 per cent of the market for biscuits lies in the rural areas and biscuits are considered one of the most nutritious based processed food products. In the interest of the consumer, reduction in VAT is a sensible thing for the Government to implement."

In addition to the VAT, the industry is also seeking exemption from the excise duty of 8 per cent .